Why Schedule L Will Not Balance in Drake Tax
Turn off autobalance first, so the difference is reported instead of plugged. Then take the out of balance amount and search the trial balance for that number or half of it. Drake lists specific causes: an asset deleted from screen 4562 instead of being marked sold, inventory on Schedule A, and amounts changed or deleted on screen L.
- Turn off autobalance
- Check the NOTES page
- Read the difference
- Check screen 4562 for deleted assets
- Reconcile inventory to Schedule A
- Verify the equity roll forward
- PRNT screen
- Reverse autobalance setup option
- Then screen L
| Trial balance account | Drake Tax screen and field | Lands on |
|---|---|---|
| Difference hidden entirely | Autobalance is on. See Note 303 | Retained earnings or partners capital |
| Asset deleted from screen 4562 | Mark it as sold instead of deleting it | Schedule L lines 10a and 10b |
| Inventory mismatch | Screen A detail versus screen L | Form 1125-A and Schedule L line 3 |
| Difference equals accumulated depreciation | Beginning column never entered | Schedule L line 10b |
| Difference equals distributions | Distributions never entered | Schedule K line 16d |
| Partner capital disagreement (1065) | Section L of the K1 screens. See Note 044 | Schedule L line 21 |
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Try it freeWhy Schedule L Will Not Balance in Drake Tax on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 42,800.00 | |
| 1200 | Accounts receivable | 68,500.00 | |
| 1300 | Inventory | 55,000.00 | |
| 1500 | Equipment | 145,000.00 | |
| 1510 | Accumulated depreciation (the account this page is about) | 47,500.00 | |
| 2000 | Accounts payable | 28,400.00 | |
| 2100 | Accrued expenses | 9,200.00 | |
| 2400 | Notes payable | 92,000.00 | |
| 2450 | Due to shareholder | 15,000.00 | |
| 3000 | Common stock | 10,000.00 | |
| 3900 | Retained earnings | 86,300.00 | |
| 3950 | Shareholder distributions | 52,000.00 | |
| 4000 | Gross receipts | 612,000.00 | |
| 5000 | Cost of goods sold | 318,000.00 | |
| 6000 | Salaries and wages | 88,000.00 | |
| 6050 | Officer compensation | 72,000.00 | |
| 6300 | Depreciation expense | 21,500.00 | |
| 6900 | Other operating expenses | 37,600.00 | |
| Total | 900,400.00 | 900,400.00 |
Step one is not a search, it is a setting
With autobalance on, there is nothing to find: Drake has already moved the difference into retained earnings on an 1120-S or partners' capital on a 1065, and Schedule L ties.
So turn it off on PRNT, recalculate, and look at the NOTES page. Note 303 tells you whether autobalance had been adjusting the return and by how much, which is the size of the error you are looking for.
Drake's own list of causes
The knowledge base names three specific ones that are easy to check:
An asset was deleted from screen 4562 instead of being indicated as sold. Deleting removes the cost and the accumulated depreciation history with no disposal entry, so both Schedule L lines move and no gain or loss is reported.
Inventory on Schedule A. The ending inventory in the cost of goods sold detail and inventory on the balance sheet are the same asset. When they disagree, cost of goods sold is wrong by the difference and no error appears.
Amounts erroneously deleted or changed on screen L. Including entries made while autobalance was on and then left behind after it was turned off.
Then the usual six
The causes that account for almost every remaining case:
- The beginning column was never entered
- Beginning accumulated depreciation was omitted, which is the most common single cause
- Ending retained earnings was typed rather than derived from beginning equity plus income less distributions
- Distributions were never entered at all
- Page 1 is incomplete, so the computed net income is wrong
- It is a rounding difference of a dollar or two
Arithmetic beats re-reading
Take the out of balance amount and search the trial balance for that exact number. One large difference is usually one missing account. Then look for half of it, because a difference equal to exactly twice an account balance means that account went in with the wrong sign.
On a 1065, also check Note 044, which flags a beginning of year disagreement between Schedule L line 21 and Schedule M-2 line 1, and is usually a section L entry on a partner's K1 screen.
Do not turn autobalance back on
The temptation at the end is to re-enable it and move on. The plug becomes next year's beginning balance, and the next preparer has no way to know it was never real.
Tax return treatment
| Form | Line |
|---|---|
| Form 1120S | Schedule L, with the roll forward on Schedule M-2 |
| Form 1065 | Schedule L line 21, with capital accounts in item L of each K-1 |
| Form 1120 | Schedule L, with Schedule M-2 and EF Message 0042 if M-2 is out |
Common questions
Why does Drake show my balance sheet in balance when it is not?
Autobalance. It plugs the difference into retained earnings on an 1120-S or partners capital on a 1065 so Schedule L ties. Turn it off on PRNT with Reverse autobalance setup option, and check the NOTES page for Note 303.
What are the most common causes of an out of balance Schedule L in Drake?
Drake names an asset deleted from screen 4562 rather than marked as sold, inventory on Schedule A disagreeing with the balance sheet, and amounts changed or deleted on screen L. Beyond those, the beginning column or beginning accumulated depreciation was never entered, distributions were omitted, or page 1 is unfinished.
How do I use the out of balance amount to find the error?
Search the trial balance for that exact figure, then for half of it. One large difference is usually one missing account, and a difference equal to twice an account balance means a sign is reversed on that account.
What should I do with an asset the client scrapped?
Mark it as sold or disposed on screen 4562 rather than deleting it. Deleting removes the cost and accumulated depreciation with no disposal recorded, which moves both Schedule L fixed asset lines and leaves the gain or loss unreported.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 17, 2026.