imjulier Posted March 8, 2014 Report Share Posted March 8, 2014 Just wondering what you all do when your S corp books end up being out of balance? If I have to "plug" a figure, I reduce expenses since the information I have from the taxpayer obviously can't be relied upon. Do any of you take a different approach or does everyone else balance all the time (impossible I say). Here is the more lengthy story. I get a spreadsheet of data downloaded from the s corp bank that the owner (not an accountant), then manipulates to try to determine her expenses and split them out into categories. She splits out taxes paid (IRS and state) , contractors, and many other categories. I take her information and put it into my own spreadsheet to compile her financial statements....balance sheet and income statement that I then use to complete the s corp return. In the process of doing this, I end up reconciling cash to the bank but it inevitably ends up being off by some amount. This year, it is off by $11K. If I talk to the business owner about it, we are unable to get anywhere because she has no idea what accounting is and why anyone actually does it. I have tried numerous times to get her to start using an accounting package but to date, she refuses. Anyone have any input into how to address this situation? Thanks. Julie Quote Link to comment Share on other sites More sharing options...
jasdlm Posted March 8, 2014 Report Share Posted March 8, 2014 $11K is a pretty big plug. Do you have her bank statements and the method she uses for tracking during the year? Might be an extension project. If I am off a small amount, I will plug sales or supplies depending on why I'm off, but never more than $100. 1 Quote Link to comment Share on other sites More sharing options...
imjulier Posted March 8, 2014 Author Report Share Posted March 8, 2014 I agree with you that this is a really big plug. I do have her complete bank account download and can do some double checking. I am an actual accountant and do understand all the debits and credits. I think there is something wrong in her spreadsheet but for the life of me I can't figure it out. Like I said, she is not a big help as she never understands why I might need additional information and why I end up charging her for 20 hours at the end of the year. We go though this every year. I think I will work to get her bank statements monthly next year and do all the bookkeeping in QB and I bet my bill to her ends up being the same over the year without all the frustration. If she refuses, I will let her go to someone else. 1 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 8, 2014 Report Share Posted March 8, 2014 Have you actually checked the math on the spreadsheet. Some people use excel like it is a word document, typing in the totals and not letting excel do the totals. Or maybe she missed some decimal points? I had one of those a couple of weeks ago where my client entered $101.94 for payment of his unemployment tax without the decimal point. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 8, 2014 Report Share Posted March 8, 2014 Small plugs are Distributions (or maybe Loans to/from Shareholder for those who did track their distributions) figuring they had something personal on a charge card or used a personal cc for business. Large -- extension and back to client. Had one long ago that had way too much in bank; after lots of questioning, she had put her personal refund into the business account as the company needed the money and forgot to note it anywhere. Cash is what cash is, so if you reconciled the bank/cc accounts or client did, then you know whether difference is income or expenses. Hand it back to client to explain the difference -- after tax season. 1 Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted March 8, 2014 Report Share Posted March 8, 2014 I would first compare the bank statement deposits to the total income, do the same for the summmed up expenses, compared them to bank statement withdrawals. Sometimes clients forget they loaned money or borrowed money or under report income Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted March 8, 2014 Report Share Posted March 8, 2014 This is why I don't take business clients that don't use QuickBooks. I tell them they either have to enter and reconcile in QB or pay someone (me perhaps) to do it for them. I tell them that keeping books is part of being in business. If they refuse, I wish them well and send them on their way. Quote Link to comment Share on other sites More sharing options...
imjulier Posted March 9, 2014 Author Report Share Posted March 9, 2014 I found it! But I might send her on her way next year any way. She missed picking up a deposit in her revenue....too bad I spent all that time trying to look at the expenses because I was convinced it was on the expense side. Shoot and miss I guess. Oh well, I will have to tell her that me finding that one mistake probably cost her $375. Oh brother. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 9, 2014 Report Share Posted March 9, 2014 Plus another $375 for your time. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 9, 2014 Report Share Posted March 9, 2014 I've got one that is hugely out of balance, and I haven't been able to find it. And client DOES use QB. He reclassified shareholder loans to APIC, which is ok; I just moved my figure too. But he's also been running rental income through the corp and in the past zeroed out the rentals to an expense 'landlord payments', recognizing profits taken on the rentals (not owned by the corp, but he considered them managed by the corp). This year he made the other entry to APIC, since he plowed it all back into a building that is being rented to the corp as leasehold improvements. I'm off by 135k. I'm thinking extension. Quote Link to comment Share on other sites More sharing options...
imjulier Posted March 9, 2014 Author Report Share Posted March 9, 2014 Sorry Joan-That sounds worse than mine and I don't have any suggestions. Extension sounds great.Julie Quote Link to comment Share on other sites More sharing options...
SFA Posted March 9, 2014 Report Share Posted March 9, 2014 Clients often play dumb for many reasons. Do not under estimate the power of this technique. If they are in business or have rentals, then in our office, their feet are held to the fire, to participate in finding the reason for large discrepancies. I have learned the hard way. Consider all possible reasons why a client does not keep better records. Perhaps they like that you will bless them with "the fudge factor" solution. The possibility of embezzlement should not be dismissed. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 9, 2014 Report Share Posted March 9, 2014 I know that's not an issue here. It balanced last year, and I have the QB detail, but I'm not seeing it. Yuck. And I really really hate daylight savings time. I can't say that enough. 1 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 9, 2014 Report Share Posted March 9, 2014 Check your ending balances from last year with his opening balances. He could have changed some things from 2012 after he gave you the file, or could have inadvertently used 2012 when doing his entries early in the 2013 year. I have one client that, even with a closing date set or the warning about a transaction being more than 90 days in the past, will still proceed and enter things with the wrong dates so that they end up in the wrong year. Quote Link to comment Share on other sites More sharing options...
jasdlm Posted March 10, 2014 Report Share Posted March 10, 2014 I, too, hate daylight savings time . . . and C Corps where the owner makes a substantial loan to shareholder, has no loan documentation, and is not treating the loan as an 'arm's length transaction', making payments, charging interest, etc. Quote Link to comment Share on other sites More sharing options...
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