The equity balances consist of capital stock (either common stock, preferred stock, or both) and additional paid-in capital.
In this post, we'll share exactly where you can find your equity balances and how to report them in Finaloop.
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1. Finding the total opening balances
Your beginning equity for this year, should always be the as same your ending equity in last year's tax return, unless you had some major adjustments or errors in your tax return.
For your C corporation, you can find the equity balances on Page 6, Schedule L, Lines 22-23 of your business tax return (Form 1120):
2. Allocating the total opening balances to the shareholders
To have greater accuracy in your books and to be able to track each shareholder's equity balances on an ongoing basis, you should allocate the opening equity balances between your shareholders. If you want even greater accuracy, you can break down the Common stock amount to the number of shares and their par value.
The breakdown of the equity balances per each shareholder can be found in various places, including the tax return itself, or other records such as your balance sheet and cap table. If you have no records of such breakdown, you may consult with your CPA or tax preparer as to how to find or reconstruct it. Note: the sum of the broken-down amounts should be equal to the total equity balances in your last year's tax return.
Once you have everything ready, report the balances using the "Report per shareholder" option in the Report opening balance page.
3. What to do in case you are unable to allocate the balances to your shareholders?
Don't you worry! While allocating the balances to your shareholders is more accurate, it is not necessary for filing your taxes.
Just report the total equity balances found in Step 1 above, using the "Report total" option in the Report opening balance page.
In your Finaloop balance sheet, you will see these amount with an "Unallocated" tag to indicate that they are not allocated to any of the shareholders.