Retained earning difference

[BHoffman]

I think a lot of us are business owners. We are responsible for keeping our own books in good order. Most of us understand the Income Statement. There is no Balance Sheet requirement for sole proprietors and a lot of us are taxed via Sch C.

Balance Sheets are easy to read and understand. If your Balance Sheet is correct, then it's a pretty good bet that your Income Statement is also correct. If Retained Earnings beginning balance this year is the same as last year's ending balance, then you've probably got a good starting point.

You can go down the list of accounts on a Balance Sheet and verify them. Cash? See Bank Reconciliation. Inventory? See costed year end physical inventory. Note Payable? See amortization schedules or just call the lender and get the principal balance owed on 12/31. Etc.

It doesn't take that much to understand the Balance Sheet, but it does take some effort. Unless preparers are willing to put in the effort, they are going to have a lot of trouble with business returns. I don't think anyone can successfully and/or confidently prepare a business tax return unless they are comfortable with the basics of the Balance Sheet. The more comfortable, the easier the return will be to prepare. If a preparer has no familiarity with the Balance Sheet, he or she is going to suffer some real misery and confusion, not to mention the real risk of consequences to the client.

I'm not always the brightest bulb in the chandelier, but I know what I don't know and I know what I need to know and I know how to learn. Community colleges offer day and evening basic accounting courses that are cheap, easy, and fun.

[BHoffman]

FWIW: Here is something I wrote up a long time ago for clients. It is for accrual accounting using Quickbooks, and it is extremely basic. You're on your own as to how you interpret it. HTH.

[Gretel]

FWIW: Here is something I wrote up a long time ago for clients. It is for accrual accounting using Quickbooks, and it is extremely basic. You're on your own as to how you interpret it. HTH.

Thanks, this is great to help clients understand what they are looking at.

[Uncle Sam]

Retained Earnings Difference

I seemed to have opened up a long winded discussion here on the ability to prepare a partnership or corporation return without comprehending accounting.

In part that was my intent - because I find it inexcusable for a preparer to prepare a partnership or corporation return without that knowledge.

I have come across a number of preparers on not just this board, but others that practitioners use, that haven't a clue as to what balance sheet accounting is - and they only comprehend things from the income tax reporting standpoint.

The IRS made it easy for these folks to find a convenient excuse to not prepare the balance sheet if they meet the qualifications. But what is not understood from hindsight, is that by doing that it can cause a mess of problems and headaches down the road.

So if I wasn't tactful - sorry about that - but the issue that I addressed were pertinent.

[Davc]

Community colleges offer day and evening basic accounting courses that are cheap, easy, and fun.

The use of the word "fun" is why all of your friends and relatives think you're odd.

[BHoffman]

The use of the word "fun" is why all of your friends and relatives think you're odd.

Thank you for not pointing out the words "cheap" and "easy".

[JohnH]

[Corduroy Frog]

Factual Statements

I don't think anyone with a smattering of knowledge of the subject matter would disagree with the substance of your statements.