The Balance Sheet

Tax file memorandum

From: John

Subject: Sue, taxpayer/business owner

Engagement: Issues

Today a new potential client came in, requesting a set of financials as well as a tax return that needs to be filed in order to apply for a bank loan. She runs a small business that is in need of an expansion. The client has been tending to her own accounting work, since her accountant quit six months ago. Upon viewing the information, there seems to be some discrepancies such as: a lack of documentation for expenses as well as income. I requested additional documentation, but the client has given me all she has. At this point there is not enough information to complete an accurate return or set of financial.

Issues: If the tax return and financial report cannot be completed, Sue will be unable to make a loan, resulting in her business closing down and a layoff of her current employees.

Tax file memorandum

From: John

Subject: Sue taxpayer/business owner

Engagement: Conclusions

Without the additional documents, I can only process a balance sheet. The balance sheet, or statement of financial position, will provide Sue with a current financial snapshot of her business for the current time period, according to the data I have on hand. It will not be the true reflection, until I can factor in the missing documentation. But this may be enough for the bank to go on to start the loan process. It lists her assets, liabilities and the difference between the two, which is the owner's equity, or net worth. Hopefully, the bank can use this information as a good enough basis to accept her loan application.

At this time I will not be able to