Why the Balance Sheet Is Out of Balance in UltraTax CS
UltraTax generates a diagnostic and the Return Summary shows the difference. Take that number and search the trial balance for it, and for half of it. Then check the three UltraTax specific causes: retained earnings fields populated on Screen L-2, a stale force field, and the $10 default rounding tolerance on new clients.
- Read the difference from the Return Summary
- Search the trial balance for that number
- Clear the retained earnings fields on Screen L-2
- Check the force fields
- Check beginning balances
- Confirm it is not rounding
- Review the diagnostics
- Return Summary
- Balance sheet difference
| Trial balance account | UltraTax CS screen and field | Lands on |
|---|---|---|
| Difference reported | Return Summary and the diagnostics | Schedule L |
| Retained earnings populated | Screen L-2 fields should be blank | Schedule L versus Schedule M-2 |
| Tax codes 467 to 470 assigned | Remove them from the retained earnings fields | Schedule L versus Schedule M-2 |
| Stale force field | Screen L, Partners' capital accounts (Force) | Schedule L line 21 |
| Difference equals accumulated depreciation | Beginning column never entered | Schedule L line 10b |
| Difference under $10 on a new client | Default rounding tolerance | Absorbed rather than reported |
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Try it freeWhy the Balance Sheet Is Out of Balance in UltraTax CS 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 |
Start with the number UltraTax gives you
When the balance sheet does not tie, UltraTax generates a diagnostic and the Return Summary shows the difference. That figure is the best evidence available, so read it before touching any input.
Search the trial balance for that exact amount: one large difference is usually one missing account. Then search for half of it, because a difference equal to twice an account balance means that account went in with the wrong sign.
The three causes specific to UltraTax
Retained earnings entered on Screen L-2. Those fields should be blank so Schedule M-2 drives the ending figure. Populated, or with tax codes 467 to 470 assigned to them, Schedule L and Schedule M-2 disagree and it presents as a balance sheet error.
A force field left from a prior year. Screen L has a Partners' capital accounts (Force) field, among others. A force that was correct once and is now stale produces a difference with no visible cause in the current year inputs.
Rounding. The default tolerance for new clients is $10. A difference of a few dollars may be absorbed rather than reported, which is worth knowing when the schedules look right and something still seems off.
Then the usual suspects
The causes that account for nearly everything else, in the order worth checking:
- The beginning column was never entered, which is every first year client with no proforma
- Beginning accumulated depreciation was omitted, the single most common one, because it is not on the current year trial balance
- Distributions were never entered
- Page 1 is incomplete, so the computed net income is wrong
- Inventory on the balance sheet does not agree with the cost of goods sold computation
On a 1065, check the capital accounts separately
Schedule M-2 and item L of the K-1s are built from Screen M1M2. If a field has allocations entered through the Ptr Alloc button without a total entered in the field itself, M-2 lines 3, 4 and 7 will not match item L, and the balance sheet follows them.
Remember too that M-1 is book basis while M-2 and the K-1 are tax basis, so those two not agreeing is not the error you are looking for.
Do not force it
An override that makes Schedule L tie turns this year's unexplained difference into next year's beginning balance, with the trail a year colder. If the client's books genuinely do not balance, that is a conversation with the client.
Tax return treatment
| Form | Line |
|---|---|
| Form 1120 | Schedule L, with the reconciliation on Schedules M-1 and M-2 |
| Form 1120S | Schedule L, with Schedule M-2 on Screen Ms |
| Form 1065 | Schedule L line 21, with capital accounts from Screen M1M2 |
Common questions
How do I find out how much my UltraTax balance sheet is out by?
The Return Summary shows the difference, and UltraTax generates a diagnostic when the balance sheet does not tie. Use that figure as the starting point: search the trial balance for it and for half of it.
Why does Schedule L disagree with Schedule M-2 in UltraTax?
Most often because the retained earnings fields on Screen L-2 were populated, or tax codes 467 to 470 were assigned to them. They should be blank so the M-2 roll forward drives the ending figure. On an 1120S there is also a legitimate difference between book retained earnings and the accumulated adjustments account.
Can a small difference be hidden by rounding?
Yes. The default rounding tolerance for new clients is $10, so differences inside that may be absorbed rather than reported. It is worth knowing when the return looks clean and the figures still seem a few dollars out.
Why is my balance sheet out by the amount of accumulated depreciation?
Because the beginning accumulated depreciation was never entered. It does not appear on the current year trial balance, so it has to come from the asset module, the depreciation schedule or the prior year return.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 18, 2026.