What Do Parentheses Around A Register Mean

Bookkeeping – Debits and Credits with Parenthesis on the Balance Sheet (Lesson 13)

To identify offsets, parenthesis is used with the final report read by owners and the management team.

In the terminal 12 lessons this series introduced debits and credits for the six types of accounts. In add-on, the financial statement human relationship betwixt the balance sail and the income statement (turn a profit and loss) was explained. Lesson 12 addressed contra accounts. In the examples used with contra accounts it was illustrated how the contra amount is reported with parenthesis.

Recollect contra accounts are substantially an offset to a primary account. Contra information is ever reported in parenthesis. Well, other information in the two primary financial statements are also reported using parenthesis. This lesson explains parenthesis in rest sheet accounts. For the bookkeeper, the hole-and-corner to the parenthesis usage is this:

Parenthesis are always used in reports to identify contra account values; AND/OR
Parenthesis are sometimes used to report atypical information related to types of accounts.

Many of y'all are wondering what information technology is meant by "Atypical". Singular refers to data in a type of account that is non traditional but is nevertheless normal. To elaborate on this, hither are some examples with each of the types of accounts.

Balance Sheet – Assets

The asset type of accounts is split into 3 distinct groups. For more information read The Balance Sheet – Elementary Format.

Current Assets- Those assets that tin exist turned into cash in a relatively short menstruation of fourth dimension (less than one year).
Fixed Assets- Assets, usually concrete in nature, that will be used over more i accounting cycle. (more than i year)
Other Assets- Assets that are uncommon and held for use in the futurity (such as land for future expansion) or intangible in nature. Intangible examples include ownership of copyrights, patents etc. But the most mutual intangible is the price of loan financing.

Virtually often a reader with these types of accounts see contra accounts in parenthesis to include:

Allowance for doubtful accounts
Depreciation
Amortization

As explained in Lesson three and in Lesson iv, whenever an nugget type of account has a credit balance it is customary to report this information down in liabilities. Nearly small business accounting software is unable to this. Therefore, when an nugget type of account has a credit balance such as an overdrawn depository financial institution account, the information is reported with parenthesis around the value.

Residual Sheet – Liabilities

Very like to asset type of accounts, liabilities take two major groupings. The starting time are electric current liabilities ; current meaning due within the accounting cycle (less than one year). The second group are long term liabilities; those amounts owed over extended periods of fourth dimension (more ane year). The traditional value in liabilities are credit balances. The not-traditional types of information are reported via parenthesis, i.due east. debit balances.

Debit balances in credit driven accounts include:

Amounts owed from governmental authorities back to the business for over-payments or taxation refunds;
Payments in backlog for payroll related items;
3^rd party benefit providers attributable money back to the company;
Payroll taxes in excess of filed reported amounts;
Vacation and sick time paid in advance; AND
Principle payments in excess of balance remaining related to LT loans.

Equity Accounts

With disinterestedness accounts, contra accounts are abnormal; however, payments to owners can and are often reported as a contra value to retained earnings. Most bookkeepers create main accounts for draws and distributions for each respective possessor. Therefore, parenthesis are used to report this. Run into below:

Equity
Stock $ZZ,ZZZ
Capital letter paid in excess ZZZ,ZZZ
Retained Earnings ZZZ,ZZZ
Distributions/Dividends (ZZ,ZZZ)
Current Earnings ZZZ,ZZZ
Total Equity $ZZZ,ZZZ

There is one actually interesting note to parenthesis with equity accounts. In a prior lesson it was explained that when there is a turn a profit or a loss from the income statement it is automatically reported in the current earnings line. Naturally you want sales, which are credit driven, to exceed costs. If then, and then the final rest is a turn a profit which results in a credit balance. This turn a profit is displayed in the equity section without parenthesis. After all, it is a credit value in a credit based type of account (Equity).

What happens when the business incurs a loss? Well let's walk through this.

FOR A LOSS TO OCCUR ON THE INCOME STATEMENT, (Profit AND LOSS STATEMENT), COSTS [DEBITS] EXCEED SALES [CREDITS]. IF And so, And so THE VALUE ON THE Bottom LINE IS A DEBIT VALUE WHICH IS REPORTED IN THE "Current EARNINGS' LINE OVER ON THE BALANCE Canvas IN THE Equity Department. A DEBIT VALUE IN THE EQUITY Department SHOULD Have PARENTHESIS Around THE VALUE. THUS, LOSSES Have PARENTHESIS IN THE EQUITY SECTION.

Summary- Parenthesis on the Remainder Sheet

Parenthesis in remainder sheet accounts signal ane of the two different possibilities. First the value may be related to a contra business relationship such as depreciation or amortization. The second relates to reporting singular data. Atypical means that it is non normal to have this, but it can and does happen. The best example is a loss in a business organization. Losses are not desired merely it does happen. This loss is presented with parenthesis as the loss is a debit value in a credit driven type of account. ACT ON KNOWLEDGE.