How uncashed checks affect balance sheets...

Forum|Forum|3 years ago
February 10, 2023
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I run an S-Corp and for our K-1 we need to report a balance sheet. We recognize our December expenses in our earnings for the year, but the checks for those December expenses outstanding/cashed the following year. The expense has affected the "profit" of the business, but bank statements show a higher amount than is reality due to the uncashed checks. Any ideas on the best way to reconcile those on our balance sheet? Thanks for any help

ThomasM125

The checks you write are deductible even though they have not been cashed. Thus, you should subtract them from your bank balance when they are written. So your bank balance on the balance sheet will be the net balance, assuming all the checks were cashed. So, the checks will be deducted on your income statement, and that will flow to retained earnings and offset your cash and other assets so your balance sheet will balance.

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