Balance Sheet and Profit and Loss Statement

This Self-Study course is designed for Tax Professionals, including tax return preparers, Annual Filing Season Program (AFSP) participants, Enrolled Agents (EAs), Certified Public Accountants (CPAs), accountants, bookkeepers, and other professionals who work with business clients and information reporting requirements.

This course does not include video lessons. The course is completed through independent study of the course materials followed by a final exam. After reviewing the course materials and successfully passing the final exam, participants receive IRS CE/CTEC credit in their account.

The course focuses on Financial Statements in the Work of a Tax Professional and provides a practical understanding of how financial statements are used when reviewing a business’s financial information and preparing tax returns. You will learn what financial statements are, how they differ from tax returns, what information they provide, and why Tax Professionals should be able to properly read and analyze them.

The course explains the differences between Cash Basis and Accrual Basis Accounting and how the accounting method affects the timing and presentation of income and expenses. You will also learn how to read and analyze the two primary financial statements used in business tax preparation: the Profit and Loss Statement (P&L) and the Balance Sheet. Special attention is given to the structure of the Profit and Loss Statement, the classification of income and expenses, and expense categories that require additional attention during tax return preparation. You will learn how to identify common accounting errors, unusual transactions, inconsistencies, and Red Flags that may indicate that additional questions or corrections are necessary before information from the P&L is used for tax purposes.

The course also provides a detailed overview of the Balance Sheet, including its major components and the relationship between assets, liabilities, and equity. You will learn how to review Balance Sheet accounts, identify common errors and inconsistencies, and recognize Red Flags that may require further investigation before preparing a business tax return.

The course will help you develop a systematic approach to reviewing financial statements, identify potential problems before they affect a tax return, and better understand the financial information provided by business clients.