Negative Cash in checking

[JCH]

My new LLC client just delivered her books with a negative cash balance on 12/31. When I asked how this was possible, she said she holds the checks for a few weeks until she has some income. How do people deal with clients like this?

[Jiggers]

Negative Cash

My new LLC client just delivered her books with a negative cash balance on 12/31. When I asked how this was possible, she said she holds the checks for a few weeks until she has some income. How do people deal with clients like this?

Get your fee up front, cash check and be sure it clears before starting the work.

[ChEAr$]

She should be disabused

My new LLC client just delivered her books with a negative cash balance on 12/31. When I asked how this was possible, she said she holds the checks for a few weeks until she has some income. How do people deal with clients like this?

of the notion that any of those checks she held are real tax deductions.

This IS what you're saying, right? That certain checks she did not deliver? If so,
no deduction for whatever they're for, AND adjust ending bank balance (for balance
sheet purposes on entity return) accordingly.

[Snaggletooth]

Accrual Basis

Suggest she go to the accrual basis for several reasons. Firstly, the games they play with end-of-year checks and deposits won't make any difference to her taxable income, to IRS, or to anyone else. Secondly, her company has better standing in the audit community if she ever needs financial statements for the bank. Thirdly she has just added several hours of billable time to her fee for her tax practitioner.

[S T]

Just worked thru one

I had a similar problem, kept asking questions, why the negative, and whether there were loans or some other cash infusion. Couldn't understand why the negative bank balance.

I had a prior thread on this http://www.thetaxbook.com/forums/sho...=cash+negative

After continued inquiries found out that the client had not or incorrectly posted a deposit, so we were able to correct 2006. But as both the client and I suspect, there is another error in deposit posting going back to 2004.

Sandy

[JCH]

Thank you all for the input and responses. The business is accrual, and the checking balance at year end is still negative and she's still holding the checks. All of my other businesses are cash basis. Is this still a problem? How do I present a negative checking account on the balance sheet? Thanks.

[JG EA]

With a minus sign

This does happen so represent it with a minus sign and all should balance out.