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This article applies to:

  • Product: UltraTax CS
  • Return type: 1120 Corporation
  • Subject: balance-sheet-m1-m3

Troubleshoot Schedule L balance sheet out of balance message

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If your Schedule L total assets don't equal total liabilities, you'll get an error message. Use this information to troubleshoot the problem.

S Corporation

Verify the calculations for Schedule L Retained Earnings.
  1. Go to
    Forms view
    , then the RE folder, and open the Retained Earnings Reconciliation Worksheet.
  2. Make sure the information in the
    Schedule L - Retained Earnings
     calculation is correct.
  3. If the
    Retained Earnings - Unappropriated
     amount on the RE worksheet doesn't look correct, go to the
    Schedule M-2 - Retained Earnings
     section.
  4. Look at the
    Retained Earnings Unappropriated/Timing Differences
     column to find out where the
    Retained Earnings - Unappropriated
     amount is coming from.
  5. If you need to change the
    Beginning of year Retained Earnings - Unappropriated
     amount, go to the
    Balance Sheet
     folder. Open the
    L-2
     screen.
    note
    If the corporation was not a C corporation in prior years, the
    Beginning of Year
     column should be blank.
  6. If you need to change the
    Retained Earnings - Unappropriated other additions, reductions or distributions
     amount, go to the
    Balance Sheet
     folder and open the
    Ms
     screen.
  7. Check the amounts in the Schedule M-2 section:
    • Transfer basis adjustments to REU/Timing Differences
       shouldn't be marked.
    • Carry book/tax difference to Schedule M-2
       shouldn't have an
      R
      .
If you need to change the
Beginning of year Retained Earnings - Unappropriated
 amount:
  1. Go to the
    Balance Sheet
     folder and open the
    Ms
     screen.
  2. Check the amounts in the
    Schedule M-2
     section.
    • Transfer basis adjustments to REU/Timing Differences
       shouldn't be marked.
    • Carry book/tax difference to Schedule M-2
       shouldn't have an
      R
      .
If you agree with the Retained Earnings - Unappropriated amounts:
  1. Go to the
    L-2
     screen in the
    Balance Sheet
     folder.
  2. Be sure that the
    End of Year
     column doesn't have any amounts entered for retained earnings.
  3. Go to the
    Ms
     screen.
  4. Be sure the net income (loss) per books isn't forced.
  5. Check the
    Carry book/tax difference to Schedule M-2
     field to be sure it's correct.

All others

The retained earnings need to match the end of year amounts on Schedule M-2. If they don't, follow these steps.
  1. Open the
    L-2
     screen in the
    Balance Sheet
     folder.
  2. Make sure there aren't any amounts in the
    Retained Earnings
     fields in the
    End of Year
     column.
If the end of year amounts match between the retained earnings and Schedule M-2, follow these steps:
  1. Go to the
    Balance Sheet
     folder and open the
    Mc
     screen.
  2. Check that the net income (loss) per books isn't forced.

More troubleshooting steps

Make sure there aren't any other diagnostics related to the Schedule L that could cause the difference. This includes all FYI and critical diagnostics. Also, make sure there aren't any overrides in Forms View.
If the preceding steps don't bring the balance sheet back in balance, follow these steps:
  • Verify that you don’t have any additional diagnostics related to the Schedule L, which may clarify where the difference is coming from. This includes all FYI and Critical diagnostics.
  • Verify that you don’t have any overrides entered in Forms View.
  • Do you recognize the amount by which you are out of balance? If so, is the item being included, doubled, or excluded from the Schedule L?
  • Are the total assets, total liabilities, or neither correct?
  • Which lines are incorrect on the Schedule L?
  • If Retained Earnings aren't correct and you have followed the steps earlier, which line on the M-1 or M-2 is incorrect?
important
Our Support Department can assist with data entry resulting from your answers to these questions, but can't assist in determining which amounts are missing or where you should make adjustments.
  1. Check the out of balance amount. Check if the item is included, doubled, or excluded from the Schedule L.
  2. Check that the total assets and total liabilities are correct.
  3. Check for incorrect lines on Schedule L.
  4. If retained earnings still aren't correct, check for incorrect lines on the M-1 or M-2.

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