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14952: 1120, 1120S, 1065, and 990 – Balance Sheet and Auto-balance


Fed Returns Generally

An amount is populating in the liabilities and capital section of the balance sheet that I did not enter in Data Entry – how did the software calculate this amount?
 

Drake Tax provides an auto-balance feature to assist in completing the Balance Sheet of business returns. This feature affects the following lines, according to business type:

Form  Line # Line Name
1120 25 Retained earnings - Unappropriated
1120-C 25 Retained earnings - Unappropriated
1120-S 24 Retained earnings
1065 21 Partner's capital accounts
990 33 Total net assets or fund balances
990-EZ 27 Net assets or fund balances
990-PF 30 Total net assets or fund balances

When a difference exists between the total assets and the total liabilities and capital of the Balance Sheet, the auto-balance feature will automatically adjust the respective line to account for the difference.

For example, if the assets entered on the balance sheet totaled $5,000, and the liabilities and capital entered on the balance sheet totaled $2,000, the auto-balance feature would adjust the applicable line by $3,000, in order to make the total assets and total liabilities equal, or balanced. 

If the amount needs to be changed:

  • Turn off the auto-balance feature:
    • In Drake20, there is a global setup option to turn off auto-balance. If you want to turn off auto-balance globally for all returns, go to Setup > Options > Calculation & View/Print tab > Turn off auto-balance of the balance sheet. If this is not checked, turn off the auto-balance on a single return by going to the PRNT screen and checking the box Reverse autobalance setup option
    • In Drake19 and prior, go to the PRNT screen and check the box Turn off autobalance.
  • Return to View, and review the totals of the assets section and the liabilities and capital section of the balance sheet. Once you have determined which of the two totals, or if both of the totals, are incorrect:
    • Review the individual line items on the Schedule L in order to determine what line item(s) need to be corrected or added in Data Entry (you may need to consult the organization’s books for confirmation of the amounts to be reported). A few of the more common factors that could result in unexpected amounts on the Schedule L line items include, but are not limited to:
      • Amounts overridden or removed from screen L (in the 1120S and 1065 packages), L2 (in the 1120 package), or 10B (in the 990 package), in Data Entry;
      • An asset may have been deleted from screen 4562, instead of being reported as sold; 
      • Inventory amounts reported incorrectly on the Schedule A.
    • Determine the correct amount to report on the “Unappropriated retained earnings,” “Retained earnings,” or “Partners’ capital accounts” line(s), as appropriate for the return being prepared. Once you have determined the correct amount, return to Data Entry, and use the balance sheet screen to enter the amount:
      • 1120/1120-C: use screen L2
      • 1120-S: use screen L
      • 1065: use screen L
      • 990/990-EZ/990-PF: use screen 10B. Note that the amount of "total net assets or fund balances" on the 990 Balance Sheet is the total of items reported on either: line 27-29, or lines 30-32. There is no direct entry or override field for line 33. 

Note: When the auto-balance feature is active, the above lines cannot be overridden in Data Entry of the business return. The auto-balance feature must be turned off in order to directly enter an amount for those lines.

Note 303 generates on the NOTES page in View of the 1120, 1120-S, and 1065 returns when the auto-balance feature makes an automatic adjustment. Below is an example of the note that generates in the 1120 package:


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