1120S - Matching AAA Sch M-2 Column a and Sch L

Forum|Forum|6 years ago
December 7, 2019
1 reply
15 views

My understanding is that AAA Sch L (balance sheet per books) not necessary must match always AAA Sch M-2. For example, ProConnect Tax is flowing Sec 179 deduction to Sch M-2 (line 5, other deductions). In this case, final AAA M-2 (line 8) and AAA Sch L (line 24) are not equal.

One option would be to make a positive adjustment in Sch M-2 (line 3, Other additions) to neutralized, in this case, same amount Sec 179 deduction. But I am not sure this is what IRS is looking for.

ProConnect Tax Online

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Best answer by sjrcpa

There is no AAA on Schedule L. Schedule L has Retained Earnings. Yiu are correct that AAA and Retained Earnings need not be equal. RE could be accrual, entity may not always have been an S Corp, some shareholders may have left requiring AAA adjustments, there could be Other Adjustments, etc.

sjrcpaAnswer

Level 15

There is no AAA on Schedule L. Schedule L has Retained Earnings. Yiu are correct that AAA and Retained Earnings need not be equal. RE could be accrual, entity may not always have been an S Corp, some shareholders may have left requiring AAA adjustments, there could be Other Adjustments, etc.

The more I know the more I don’t know.

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