Balance Reports for S corp Business

I understand how to generate a Balance sheet Report for a business however, I have two businesses on my Quicken Home, Business & Rental Property package. 1 is the Rental Property business and 2 Is the S-corporation for my husband. NJ requires a Balance Sheet for the S corp while the Federal does not. While I account for the business checking on the report and the major credit card that is utilized for the business(not exclusively). It doesn't seem to appear correct. The S corp is a Cash business. Is there some way to generate what a S corp Balance sheet should look like? The only thing that appears correct is the balance for the year end to the S corp checking account. I've tried a few times in past but would like to get this right? Thank you
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Best Answer

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited March 9 Accepted Answer
    Quicken can't "really" account for an S-Corp, but if it only has one shareholder you certainly can get away with it  I'd suggest NOT using any personal accounts for the S-Corp as it certainly makes life simpler.

    "The liabilities for the S corp are the things the S corp uses and these are listed as depreciation's or Section 179 deductions on Form 4562."

    OK, I'd probably put the depreciation in a contra-asset Account, (an Account with a negative balance that grows larger with time), and I assume that "Section 179 deductions" are really an "amount due shareholder" since the stuff was purchased with a personal credit card?

    "Perhaps there is a way to extrapolate them from the credit card based upon categories and/or tags." 

    Not sure what you're getting at here.  If you've been classifying purchases in some way, shape of form as "S-Corp" items and these have been purchased with the personal credit card the the "holistic" accounting here is along the lines of:

    (Personal)
    Debit (increase) Loan to S-Corp Account   $XX
    Credit (increase) Credit Card Account         $XX
    and
    (Business)
    Debit (increase) {S-Corp asset or S-Corp expense)  $XX
    Credit (increase) Loan from Shareholder Account     $XX

    I'll warn you - and maybe you already know - that your husband must take a salary, reported on a W-2.  This is not optional.

    So cash transferred from the business checking Account to your personal checking Account would be accounted for either as salary (income to husband, expense to S-Corp), paydowns of the Shareholder Loan, and maybe, "distributions" that would lower the investment in the S-Corp on the personal side and the shareholder's equity on the business side.

    (N.B. - the IRS's default position, pretty much, is that an S-Corp with only one shareholder and only one employee (that same shareholder), all the income created in the S-Corp is really "salary" to the employee/shareholder.)

    I'd suggest not having the S-Corp "inside" your personal Quicken file but, instead, in its own Quicken file.  That way the balance sheet is very clear and very easy to print out.

Answers

  • NotACPA
    NotACPA SuperUser, Windows Beta Beta
    edited March 9
    How do you have these various businesses set up in Q?  Because a Balance sheet is nothing but a list, with amounts, of the various Asset and liability accounts for the business.
    OR, do you have everything commingled all over the place?  Is that credit card used for purposes OTHER than the S Corp?  How about that checking account? Are there any liability accounts for the S Corp?  Are they separate?
    On your Federal tax return is the S Corp included (probably on Schedule C)?  Or does it file it's own tax return?
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  • PegF
    PegF Member
    To answer your question allow me to clarify: The liabilities for the S corp are the things the S corp uses and these are listed as depreciation's or Section 179 deductions on Form 4562.These deductions were purchased with the same credit card as used for personal use however they have been categorized as the S corp and even tagged as such. Perhaps there is a way to extrapolate them from the credit card based upon categories and/or tags. This is how I was able to organize the deductions.
    The checking account is exclusive for the S corp business. The S corp being an extension of the sole proprietor - my husband. It has only income, tax payments for the S corp and transfers of cash (distributions?) to personal account to pay perhaps - mortgage.
    The Schedule C you mentioned would be on the Personal Federal return, however the S-corp flows to the Personal 1040 by K-1 reports and not a Schedule C. I also should correct that the rental properties are listed in our Personal 1040 Schedule E and are not separate LLC's. The rental properties has its own credit card and uses tags and categories to distinguish properties from one and another.
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited March 9 Accepted Answer
    Quicken can't "really" account for an S-Corp, but if it only has one shareholder you certainly can get away with it  I'd suggest NOT using any personal accounts for the S-Corp as it certainly makes life simpler.

    "The liabilities for the S corp are the things the S corp uses and these are listed as depreciation's or Section 179 deductions on Form 4562."

    OK, I'd probably put the depreciation in a contra-asset Account, (an Account with a negative balance that grows larger with time), and I assume that "Section 179 deductions" are really an "amount due shareholder" since the stuff was purchased with a personal credit card?

    "Perhaps there is a way to extrapolate them from the credit card based upon categories and/or tags." 

    Not sure what you're getting at here.  If you've been classifying purchases in some way, shape of form as "S-Corp" items and these have been purchased with the personal credit card the the "holistic" accounting here is along the lines of:

    (Personal)
    Debit (increase) Loan to S-Corp Account   $XX
    Credit (increase) Credit Card Account         $XX
    and
    (Business)
    Debit (increase) {S-Corp asset or S-Corp expense)  $XX
    Credit (increase) Loan from Shareholder Account     $XX

    I'll warn you - and maybe you already know - that your husband must take a salary, reported on a W-2.  This is not optional.

    So cash transferred from the business checking Account to your personal checking Account would be accounted for either as salary (income to husband, expense to S-Corp), paydowns of the Shareholder Loan, and maybe, "distributions" that would lower the investment in the S-Corp on the personal side and the shareholder's equity on the business side.

    (N.B. - the IRS's default position, pretty much, is that an S-Corp with only one shareholder and only one employee (that same shareholder), all the income created in the S-Corp is really "salary" to the employee/shareholder.)

    I'd suggest not having the S-Corp "inside" your personal Quicken file but, instead, in its own Quicken file.  That way the balance sheet is very clear and very easy to print out.
  • PegF
    PegF Member
    Tom Young While I agree with most of what you have stated It's true that the S corp income flows into the 1040 via K-1's.
    My problem is in satisfying NJ request of a Balance Sheet. I assume the Balance sheet is for the current year and not a "running" tally since the inception of the S corp.
    If I look at a Balance sheet it request information such as Inventory which his business has none - he's a consultant
    or
    Fixed assets such as a building (seeks depreciation)- only a space in a home office
    Also depreciation of machinery (computer is purchased and not depreciated only taken as Section 179.
    Liabilities such as Wages - yes a W2 had been generated and taxes paid through quarterly installments
    So Having said that what sort of things I need to report on a balance sheet - isn't much
    Any suggestions Tom are appreciated otherwise I'm baffled. Trying to find a template of an s Corp which is computer consulting to "see" what a balance sheet may look like.
    thank you
  • NotACPA
    NotACPA SuperUser, Windows Beta Beta
    edited March 9
    I'm a former computer consultant, and my late wife was a management consultant.
    You REALLY need to work on separating the S Corp finances from your personal finances.  Because if any assets (e.g., checking account) or liabilities (e.g. credit card) are "dual use" then figuring out what amounts belong on the personal balance sheet and what amounts on the S corp balance sheet can be maddening.
    Take a look, in Q, at the Net Worth report.  That's a "balance sheet" type report ... except what NJ is asking for would be BUSINESS accounts only, and BUSINESS amounts only.
    Q user since DOS version 5
    Now running Quicken Windows Subscription, Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    edited March 9
    Hi @PegF,

    You -  PegF said:
    My problem is in satisfying NJ request of a Balance Sheet. I assume the Balance sheet is for the current year and not a "running" tally since the inception of the S corp.
    If I look at a Balance sheet it request information such as Inventory which his business has none - he's a consultant
    or
    Fixed assets such as a building (seeks depreciation)- only a space in a home office
    Also depreciation of machinery (computer is purchased and not depreciated only taken as Section 179.
    Liabilities such as Wages - yes a W2 had been generated and taxes paid through quarterly installments
    So Having said that what sort of things I need to report on a balance sheet - isn't much
    Any suggestions Tom are appreciated otherwise I'm baffled. Trying to find a template of an s Corp which is computer consulting to "see" what a balance sheet may look like.
    thank you
    It is true that the state of NJ requires a balance sheet for the corporate tax return (it is Schedule B to the tax return).  Based on the information that you provided above, including but not limited to the fact that he - as the S-Corp - is a  "cash basis" taxpayer, and assuming that your husband, as a consultant, is not likely to be depreciating any fixed assets, or have a separate building used for the consultant business, the balance sheet for the consultant business is likely to include the following:

    Assets:
    Cash (checking/savings account(s)

    Liabilities:
    None (likely - unless he has a business loan, or capitalized lease)

    Shareholders Equity
    Computed as (Assets minus Liabilities = Shareholders Equity)

    Obviously the "balance sheet" is a schedule to the NJ tax return (form) that needs to be filled-in (rather than a Quicken printed report), so my suggestion would be to keep it simple, because for this type of business - it is simple.

    Let me know if you have any followups.

    Franlx

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  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited March 9
    "Tom Young While I agree with most of what you have stated It's true that the S corp income flows into the 1040 via K-1's."
    I understand that completely.  The S-Corp must prepare a separate income tax return, Form 1120S, and the Schedule K-1 gets done as part of that effort.  The Schedule K-1 goes to the shareholder who then takes numbers off that Schedule K-1 and distributes those numbers around their own Form 1040.

    "My problem is in satisfying NJ request of a Balance Sheet. I assume the Balance sheet is for the current year and not a "running" tally since the inception of the S corp."
    A balance sheet is a snapshot of an entity's assets, liabilities and equity at a point in time.  It absolutely is a "running tally"of all the entries in all those accounts from inception to date.  If you had the S-Corp in a separate Quicken file that balance sheet would be produced automatically.
    "Trying to find a template of an s Corp which is computer consulting to "see" what a balance sheet may look like."
    Look at a Form 1120S (or the NJ equivalent) and you'll see a "fill in the blanks" form of balance sheet.  You'll fit what you have into that form.

    From the sounds of it your balance sheet will look like

    Assets
    Cash in Bank
    Fixed Assets*
    (Depreciation)
    ------------------
    Net fixed assets

    Liabilities
    Loan from Shareholder
    (Maybe) Employment taxes payable

    Equity
    Shareholder's Equity

    * Assumed, since you appear to be depreciating something.

    You're going to have to derive the shareholder's equity since you can't see that as a separate amount in Quicken the way you've got it set up.  Assuming this is the first year of operations and nothing unusual has happened that should be, basically, the income or loss for the year. 
  • PegF
    PegF Member
    Tom Valuable information. A few caveats The S corp for half of 2018 and all of 2019 was "dormant" . A friend who is an account suggested closing as my husband was working F/T employee. I wanted to hold off because you don't know. Due to covid-19 he took a consultant position for last half of 2020 and so the S corp came out of "dormancy". So here I am.
    This balance sheet for the state of NJ; I am unsure, if its "New" that I report here or do I need to fall back on the numbers from the federal returns M-2 which is a running accumulation since inception of the S corp?
    I went to the NJ website for tax forms and took a look at their balance sheet which is very elaborate. I found myself looking up terms like "retained earnings" which I'm guessing for me would be $ that would have been dispersed either in K-1's or as transfers(distributions ) elsewhere? Perhaps this is the shareholder's equity (the K-1s)?
    The liabilities would be the what the 1120S takes as deductions - things paid by corporation to keep running? No loans were made.
    Fixed Assets would be the office furniture and storage shed that have been running for years (I'm guessing they want what was paid this year? or the cumulative paid depreciation amount or the original purchase amount?)
    I believe the Accounts payable would be the the W2 paid to my husband as the only worker.
    I do believe what I need is on the Home, Business, Rental Quicken package. It's a matter of extrapolating the right Business categories and tags(I created for business)
    Anything more you can clarify - I thank you and if too much I still want to thank you for the time you gave.
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    @PegF

    You might want to start with a book like Accounting for Dummies, not that you are one, but to better understand the terminology.

    Or you could review the summary here
    https://www.dummies.com/business/accounting/using-balance-sheets-in-accounting/

    Assets are what the business owns as of the balance sheet date. This would include the balances of any bank accounts and the depreciated value of any fixed assets such as equipment the business owns.

    Liabilities are amounts the business owes as of the balance sheet date.
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  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    "The S corp for half of 2018 and all of 2019 was 'dormant' . A friend who is an account suggested closing as my husband was working F/T employee. I wanted to hold off because you don't know. Due to covid-19 he took a consultant position for last half of 2020 and so the S corp came out of "dormancy". So here I am."
    Assuming there were no assets or liabilities inside of the S-Corp when you reported it's 2018 and 2019 activities to the taxing authorities your "opening balance sheet" for 2020 would be all zeros.
    "This balance sheet for the state of NJ; I am unsure, if its "New" that I report here or do I need to fall back on the numbers from the federal returns M-2 which is a running accumulation since inception of the S corp?"
    As I said, a balance sheet is a "snapshot" of all asset, liability and equity (or net worth) accounts at a moment of time.  And those accounts contain all the activity in those accounts from the moment of their creation to the date of the balance sheet.  Unless NJ has some significant statutory (tax) laws that are different than the federal laws, the balance sheet for federal and state should look the same.
    "I went to the NJ website for tax forms and took a look at their balance sheet which is very elaborate. I found myself looking up terms like "retained earnings" which I'm guessing for me would be $ that would have been dispersed either in K-1's or as transfers(distributions ) elsewhere? Perhaps this is the shareholder's equity (the K-1s)?"
    Shareholder's equity can be divided up among several different "equity" accounts.  Generally retained earnings can be thought of a "undistributed profits."
    "The liabilities would be the what the 1120S takes as deductions - things paid by corporation to keep running? No loans were made."
    No.  "Liabilities" generally represent amounts owed by the business to others.  If you buy a piece of machinery with a loan, that's a liability.  If you buy office supplies with a credit card, that's a liability.  The "other side" of the accounting entry, being either an asset (machine) or expense, (office supplies) does not "define" a liability.
    "Fixed Assets would be the office furniture and storage shed that have been running for years (I'm guessing they want what was paid this year? or the cumulative paid depreciation amount or the original purchase amount?)"
    Fixed assets are typically identified at "cost" (the fixed asset account), minus accumulated depreciation (the contra-asset account) for a net number.
    You might want to seek some help from a local pro, like maybe the friend that's an accountant?
  • PegF
    PegF Member
    thank you Tom Young and thank you Jim Harmon. I will attempt a balance sheet and bounce it off my accountant friend to review (he is very busy this time of year0
    Many thanks everyone.
  • PegF
    PegF Member
    Does anyone here use Turbo Tax to report their S corp return. I am having difficulty understanding the NJ tax Balance sheet columns. Something simple such as where do I enter the Income or AR. In the Beginning of Year or Year End column? No matter how I shift things I don't seem to balance. Will try reaching my accountant friend to see if he can answer this basic Question
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    In general end-of-year balances for items like accounts receivable should go in the year end columns. 

    You will probably get better responses on tax questions at the TurboTax forum
    https://ttlc.intuit.com/community/home/misc/03/en-us
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  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    edited March 14
    Hi again @PegF,

    You indicated above (in your initial posting) that the subchapter S corporation is on the "cash basis".  If that is true then the S Corp. doesn't report accounts receivable - or said another way - an "accounts receivable" account cannot appear on a cash basis corporation's balance sheet.

    The NJ tax form's balance sheet section is designed to be used by accrual basis corporations as well as tax basis, and as such it has many line items that will clearly not exist in "cash basis" books and records.  Those lines should be left blank. In addition, the balance sheet prepared for the NJ tax return (Form CBT 100-S) should match the balance sheet on the Federal tax return.

    Also - "income" would never appear on a balance sheet - that should be only on the income statement, for either accrual basis, cash basis, or tax basis.

    Hope this helps.

    Frankx

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  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    "I am having difficulty understanding the NJ tax Balance sheet columns. Something simple such as where do I enter the Income or AR."
    Since you said the S-Corp was a tax basis taxpayer, it really shouldn't be reporting AR on a balance sheet.  A cash basis taxpayer recognizes income only when cash is received.  An accrual basis taxpayer recognizes income when an invoice is issued. 
    You don't explicitly enter "income" on a balance sheet.  Very generally and in the simplest of cases, retained earnings can be viewed as a "net" number of all the income recognized vs. amounts of earnings distributed.
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