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Reconcile Schedule L and M-2 Equity Accounts for 1120 S Corporations

The
Retained earnings timing differences
 (REU) fields in the Ms screen reconcile the Schedule M-2 balances to the total retained earnings on Schedule L. If you reconcile your Schedule M-2 on a book basis, you'll probably not use the REU account. If you reconcile your Schedule M-2 on a tax basis, the REU account is helpful in tracking book or tax timing differences.
The sums of the end-of-year Schedule M-2 and REU accounts transfer to the Schedule L end-of-year Retained Earnings. If you don't use the REU account, you'll need to force the end-of-year retained earnings field in the L-2 screen.
Follow these steps to begin tracking the book and tax differences between the Schedule M-2 and the Schedule L retained earnings accounts.
  1. Enter the sum of the prior-year differences between the Schedule M-2 accounts and the Retained Earnings account in the
    Balance at beginning of year (REU)
     field in the Ms screen.
  2. Enter code
    R
     in the
    Carry book/tax difference to Schedule M-2
     field in the Ms screen to transfer the current-year book and tax differences related to depreciation, amortization, or gain on sale of assets to the REU account.
  3. Enter code
    R
     in the Sch M-2 column in the statements in the Ms screen to transfer any other book and tax differences to the REU account.
  4. Enter the detail of the prior-year differences between the Schedule M-2 and Schedule L retained earnings accounts in the
    Reconciling detail
     statement. UltraTax CS prints this detail and the current-year book and tax differences coded to the REU account in the
    Schedule M-2 and Schedule L Ending Retained Earnings Reconciliation
     statement.
  5. UltraTax CS proformas the data entered in the
    Reconciling detail
     statement and the current-year book and tax differences coded to the REU account to the following year.

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