My challenge is this. Our long term liability to a specific loan is off by just over $25,000.00 However when I try to correct with a journal entry it creates a lopsided balance of that exact amount. I have tried to enter the journal entry to a previous year, but I get the sale lopsided results. How do I correct the amount in the long term liability and still maintain the integrity of my P&L and Balance sheets?
You're an 'experienced member' so you know that you can never change just one line a set of financial statements - there has to be a balancing entry somewhere. It is impossible to make a unbalanced journal entry, so I don't understand why you think it is 'lopsided'.
If you make any income or expense entry into last-year the result will be a change in opening Retained Earnings on this years Balance Sheet.
Thank you. I corrected it by going back 2 fiscal years and offset the long term liability. Entered the correction in the memo and then drew the funds out as a cost. As the liability was pre-2018 FY and covered in my tax filings for 2016 & 2017 the correction did not create any other offset in 2018 FY results with exception to correcting the balance sheets.
It's Equity; the entry for having a loan balance that too low, is Debit Equity and Credit that Loan account. Being more in debt reduces your equity. If the loan balance is too high, that also is offset to Equity: Debit Loan and Credit Equity.
Anything from last year that was income or expense rolled into Equity, already. And if it never was income or expense, just an Initial mistaken entry, and you don't know what else is wrong, then Offset to Equity.
I put the Fixed Asset and the Loan in, offsetting each other for what I though was $10,000. Now I realize that 2 years ago, someone posted the "down payment" as Expense. That means I Debit (increase) the Fixed Asset by $2,000 and the offset is a Credit to Equity = I get "credit" for having invested more than I am showing right now.