{"id":31839,"date":"2025-08-27T12:04:51","date_gmt":"2025-08-27T17:04:51","guid":{"rendered":"https:\/\/breakingintowallstreet.com\/?post_type=biws_kb&#038;p=31839"},"modified":"2025-12-17T00:18:44","modified_gmt":"2025-12-17T05:18:44","slug":"balance-sheet-not-balancing","status":"publish","type":"biws_kb","link":"https:\/\/breakingintowallstreet.com\/kb\/3-statement-models\/balance-sheet-not-balancing\/","title":{"rendered":"Balance Sheet Not Balancing: Batman\u2019s Guide to Fixing Your Balance Sheet"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-flat ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Balance Sheet Not Balancing: Batman\u2019s Guide to Fixing Your Balance Sheet<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/breakingintowallstreet.com\/kb\/3-statement-models\/balance-sheet-not-balancing\/#Step_1_Look_at_the_Discrepancy_Each_Year_and_Note_Any_Patterns\">Step 1: Look at the Discrepancy Each Year and Note Any Patterns<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/breakingintowallstreet.com\/kb\/3-statement-models\/balance-sheet-not-balancing\/#Step_2_Review_Each_Line_of_the_Balance_Sheet\">Step 2: Review Each Line of the Balance Sheet<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/breakingintowallstreet.com\/kb\/3-statement-models\/balance-sheet-not-balancing\/#Step_3_If_You_Havent_Fixed_the_Balance_Sheet_Yet_Review_the_Cash_Flow_Statement\">Step 3: If You Haven\u2019t Fixed the Balance Sheet Yet, Review the Cash Flow Statement<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/breakingintowallstreet.com\/kb\/3-statement-models\/balance-sheet-not-balancing\/#Step_4_If_This_Still_Doesnt_Work%E2%80%A6\">Step 4: If This Still Doesn\u2019t Work\u2026<\/a><\/li><\/ul><\/nav><\/div>\n\n<blockquote><p><b>Balance Sheet Not Balancing Definition:<\/b> A Balance Sheet goes &#8220;out of balance&#8221; when Total Assets does not equal Liabilities + Equity; you can follow the 4-step process outlined here to fix this problem methodically, but you should also consider simplifying and consolidating your financial model if you keep running into this issue.<\/p><\/blockquote>\n<p>Whenever we receive questions about the Balance Sheet not balancing in a financial model, the first thing that comes to mind is <em>Batman: The Dark Knight<\/em>.<\/p>\n<p>Specifically, I think about the ending sequence, where Jim Gordon explains that Batman is \u201cthe hero Gotham deserves, but not the one it needs right now\u201d:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-31840 size-full\" title=\"Jim Gordon - The Hero Gotham Deserves\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114352\/01-Jim-Gordon-Batman-scaled.jpg\" alt=\"Jim Gordon - The Hero Gotham Deserves\" width=\"2560\" height=\"1296\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114352\/01-Jim-Gordon-Batman-scaled.jpg 2560w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114352\/01-Jim-Gordon-Batman-300x152.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114352\/01-Jim-Gordon-Batman-1024x519.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114352\/01-Jim-Gordon-Batman-768x389.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114352\/01-Jim-Gordon-Batman-1536x778.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114352\/01-Jim-Gordon-Batman-2048x1037.jpg 2048w\" sizes=\"(max-width: 2560px) 100vw, 2560px\" \/><\/p>\n<p>The same could be said about explaining and fixing a broken Balance Sheet.<\/p>\n<p><strong>The answer you <em>deserve<\/em> is that if your Balance Sheet is out of balance, your model is overly complex and does not follow best practices.<\/strong><\/p>\n<p>We have <a href=\"https:\/\/breakingintowallstreet.com\/kb\/finance\/financial-modeling-best-practices\/\" target=\"_blank\" rel=\"noopener\">a full guide to financial modeling best practices<\/a>, so you should refer to that and revise your model accordingly, time permitting.<\/p>\n<p>Most likely, your <a href=\"https:\/\/breakingintowallstreet.com\/kb\/accounting\/balance-sheet\/\" target=\"_blank\" rel=\"noopener\">Balance Sheet<\/a> and <a href=\"https:\/\/breakingintowallstreet.com\/kb\/accounting\/cash-flow-statement\/\" target=\"_blank\" rel=\"noopener\">Cash Flow Statement<\/a> are far too complex; by simplifying the BS down to ~5-6 items on each side, you\u2019ll make it 10x easier to link and balance.<\/p>\n<p>But then there\u2019s the answer you <em>need<\/em> right now.<\/p>\n<p>Let\u2019s say it\u2019s 3 AM, you\u2019ve just finished your last Red Bull, and the coffee machine is broken.<\/p>\n<p>You need to fix your broken model ASAP before you can go home and get a few hours of sleep.<\/p>\n<p><strong>In this case, there is a step-by-step process to fix a broken model, even if your Excel file is set up in an overly complicated or non-ideal way.<\/strong><\/p>\n<p>A summary of the steps follows. Below, we\u2019ll go through an example of a broken <a href=\"https:\/\/mergersandinquisitions.com\/3-statement-model\/\" target=\"_blank\" rel=\"noopener\">3-statement model<\/a> and explain how to follow these steps to fix it.<\/p>\n<ul>\n<li><strong>Step 1: Look at the Discrepancy Each Year and Note Any Patterns<\/strong> \u2013 Is the Balance Sheet out of balance by a constant amount? Does it vary? Does it change by the same amount each year? These differences can hint at the problems.<\/li>\n<li><strong>Step 2: Review Each Line of the Balance Sheet<\/strong> \u2013 Check to make sure that each BS line item is either <strong>reflected on the CFS<\/strong> once and only once with the correct signs, or that it <strong>flows in from CFS line items<\/strong> with the correct signs. Highlight in yellow the properly-accounted-for items on both statements as you progress.<\/li>\n<li><strong>Step 3: If You Finish the Balance Sheet, But It\u2019s Still Not Balanced, Review the Cash Flow Statement <\/strong>\u2013 Focus on non-zero, unhighlighted line items because these are the ones that haven&#8217;t yet been accounted for on the BS. Also, check the Ending Cash numbers in the historical periods and the Net Change in Cash links.<\/li>\n<li><strong>Step 4: If Nothing Else Works<\/strong> \u2013 If you still cannot find the problem after all of this, consider simplifying the model to reduce the number of line items and links. It takes time to consolidate, but it\u2019s faster than going through this process multiple times.<\/li>\n<\/ul>\n<h3><strong>Files &amp; Resources:<\/strong><\/h3>\n<ul>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.dualstack.us-east-1.amazonaws.com\/101-12-Balance-Sheet-Not-Balancing-Errors.xlsx\" target=\"_blank\" rel=\"noopener\">Balance Sheet Not Balancing \u2013 File with Errors (XL)<\/a><\/li>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.dualstack.us-east-1.amazonaws.com\/101-12-Balance-Sheet-Not-Balancing-Fixes.xlsx\" target=\"_blank\" rel=\"noopener\">Balance Sheet Not Balancing \u2013 Corrected File (XL)<\/a><\/li>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.dualstack.us-east-1.amazonaws.com\/101-12-Balance-Sheet-Not-Balancing-Slides.pdf\" target=\"_blank\" rel=\"noopener\">Balance Sheet Not Balancing \u2013 Step-by-Step Process to Fix (PDF)<\/a><\/li>\n<\/ul>\n<h3><strong>Video Table of Contents:<\/strong><\/h3>\n<ul>\n<li><strong>0:00:<\/strong> Introduction<\/li>\n<li><strong>4:53:<\/strong> Step #1: Review the Discrepancies<\/li>\n<li><strong>7:00:<\/strong> Step #2: Do a Line-by-Line Balance Sheet Review<\/li>\n<li><strong>19:48:<\/strong> Step #3: Review the \u201cUnconfirmed\u201d CFS Line Items<\/li>\n<li><strong>24:17:<\/strong> Step #4: If Nothing Here Works&#8230;<\/li>\n<li><strong>24:45:<\/strong> Recap and Summary<\/li>\n<\/ul>\n<p><strong>What Makes a Balance Sheet Go Out of Balance?<\/strong><\/p>\n<p>The Balance Sheet in a 3-statement model can go out of balance for a range of reasons, but most problems fall into one of three categories:<\/p>\n<ol>\n<li><strong>Forgetting to Link and Reflect a BS or CFS Line Item on the Other Statement<\/strong> \u2013 This is very common when your statements are too complicated.<\/li>\n<li><strong>Double-Counting a Line Item on the Other Statement<\/strong> \u2013 For example, many people get confused about what goes in the \u201c<a href=\"https:\/\/breakingintowallstreet.com\/kb\/financial-statement-analysis\/change-in-working-capital\/\" target=\"_blank\" rel=\"noopener\">Change in Working Capital<\/a>\u201d section on the Cash Flow Statement and end up adding or subtracting items twice.<\/li>\n<li><strong>Linking to Items with the Incorrect Signs<\/strong> \u2013 On the Assets side, you always <em>subtract<\/em> CFS line items that flow in, and on the L&amp;E side, you always <em>add<\/em> CFS line items that flow in.<\/li>\n<\/ol>\n<p>Another common issue is that people sometimes link Balance Sheet line items, such as PP&amp;E, directly to <em>external schedules<\/em>, such as a CapEx and Depreciation schedule, rather than lines that are directly on the Cash Flow Statement.<\/p>\n<p><strong>This is extremely poor modeling practice and should be avoided at all costs. Even if it\u2019s 3 AM and you\u2019re out of Red Bull, change the model to fix this.<\/strong><\/p>\n<p>One \u201cdifferent\u201d problem is that historical statements are sometimes incorrect or inconsistent, which can result in <em>the projections<\/em> being off \u2013 even if the historical Balance Sheet balances (see below).<\/p>\n<div class='code-block code-block-2' style='margin: 8px 0; clear: both;'>\n<div class=\"kb-adinsert-modal\">\n    <div class=\"kb-adinsert-top\">\n      <div class=\"media\">\n          <img decoding=\"async\" class=\"alignnone size-full wp-image-28448\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/04\/24164120\/adv-fm-tile.png\" alt=\"PowerPoint Pro\" width=\"128\" height=\"128\" \/>\n      <\/div>\n      <div class=\"content\">\n          <h3>Master Financial Modeling for Investment Banking With <strong>BIWS Core Financial Modeling<\/strong><\/h3>\n      <\/div>\n    <\/div>\n    \n    <div class=\"full_text\">\n    \t<ul>\n        \t<li>\n            \t<h4>Become a financial modeling pro<\/h4>\n              <p>158 videos, detailed written guides, Excel files, quizzes, and more<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Complete 10+ detailed global case studies<\/h4>\n            <p>These include both the theory and the practical applications<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Prepare for your internship or full-time job<\/h4>\n            <p>Gain the skills you need to \u201chit the ground running\u201d on Day 1\n\n<\/p>\n\t\t\t  <\/li>\n      <\/ul>\n        \n      <a class=\"cta-link orange-button-medium\" href=\"https:\/\/breakingintowallstreet.com\/core-financial-modeling\/\" target=\"_blank\">Full Details<\/a>\n      \n      <a class=\"cta-link orange-button-medium bg-blue\" href=\"https:\/\/biws-support.s3.us-east-1.amazonaws.com\/Course-Outlines\/Core-Financial-Modeling-Course-Outline.pdf\" target=\"_blank\" rel=\"noopener\">Short Outline<\/a>\n    <\/div>\n<\/div><\/div>\n\n<h2><span class=\"ez-toc-section\" id=\"Step_1_Look_at_the_Discrepancy_Each_Year_and_Note_Any_Patterns\"><\/span><strong>Step 1: Look at the Discrepancy Each Year and Note Any Patterns<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>At the bottom of the Balance Sheet projections, take Total Assets, subtract Total Liabilities &amp; Equity, and <strong>note any patterns<\/strong>:<\/p>\n<p><img decoding=\"async\" class=\"wp-image-31841 size-large aligncenter\" title=\"Balance Sheet Discrepancy\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114502\/02-Balance-Sheet-Discrepancy-1024x674.jpg\" alt=\"Balance Sheet Discrepancy\" width=\"1024\" height=\"674\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114502\/02-Balance-Sheet-Discrepancy-1024x674.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114502\/02-Balance-Sheet-Discrepancy-300x197.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114502\/02-Balance-Sheet-Discrepancy-768x505.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114502\/02-Balance-Sheet-Discrepancy-1536x1011.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114502\/02-Balance-Sheet-Discrepancy.jpg 1770w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p>This is useful because these patterns can give you a hint at the problem(s):<\/p>\n<ul>\n<li><strong>Constant Difference:<\/strong> If it\u2019s a constant difference each year, such as +10 or \u201310, usually it means that you <strong>forgot to link an item in a single year<\/strong>, but it <em>is<\/em> linked correctly or $0 after that.<\/li>\n<li><strong>The Difference Changes by a Constant Number<\/strong> \u2013 This usually means that an actual formula is wrong, but only in one specific period, such as in Year 1 of the forecast.<\/li>\n<li><strong>Variable Difference with Variable Changes<\/strong>: If the discrepancy changes each year, and there\u2019s no pattern to the <em>changes<\/em>, it means that one or more of the formulas is wrong throughout the forecast period (harder to track down).<\/li>\n<\/ul>\n<h3><strong>Why We Don\u2019t Normally Create \u201cDifference Columns\u201d<\/strong><\/h3>\n<p>Some trainers suggest creating a \u201cdifference column\u201d for the Balance Sheet to plot changes in each line item and compare these changes to the overall discrepancy.<\/p>\n<p><strong>This is a nice idea in theory, but it\u2019s difficult to use in real life because fixing a broken Balance Sheet is rarely as simple as spotting a single forgotten line item.<\/strong><\/p>\n<p>In our experience, it\u2019s usually a more complex issue or <em>multiple errors<\/em>, which makes this approach less useful.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Step_2_Review_Each_Line_of_the_Balance_Sheet\"><\/span><strong>Step 2: Review Each Line of the Balance Sheet<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Start with the Assets side of the Balance Sheet and move to the Liabilities &amp; Equity side.<\/p>\n<p><strong>SKIP any line items that stay constant in every single year, such as Goodwill in many models \u2013 they cannot be directly causing the Balance Sheet to go out of balance.<\/strong><\/p>\n<p>They may <em>indirectly<\/em> cause problems, but you can identify and address these issues in the next step of the process.<\/p>\n<p>For each Balance Sheet item that changes over this period, check the following:<\/p>\n<p><strong>a) Is this change reflected somewhere on the CFS, as with many Working Capital line items?<\/strong> And if so, is the sign correct, such as taking Old Asset \u2013 New Asset and New Liability \u2013 Old Liability to calculate the changes on the Cash Flow Statement?<\/p>\n<p><strong>b) If not, does this line item correctly link to the matching CFS line items, with the correct signs?<\/strong> On the Assets side, you always subtract CFS lines, and on the L&amp;E side, you always add CFS lines.<\/p>\n<p><strong>c) If one of these is true, mark the line items as \u201ccorrect\u201d by highlighting them in yellow on the BS and CFS.<\/strong><\/p>\n<p>If the line item is <em>not<\/em> correct because it\u2019s missing a link, it uses the incorrect sign, or it\u2019s double-counted, make the correction and then highlight the relevant lines as being correct.<\/p>\n<p><strong>d) If you get a \u201ccollision,\u201d fix it<\/strong> \u2013 If you\u2019re checking a Balance Sheet line item and you find something on the CFS that has <em>already<\/em> been linked to a previous Balance Sheet line, <strong>you have a double-counted item.<\/strong><\/p>\n<p>Fix this by removing one of these links and then highlighting the relevant lines.<\/p>\n<p>To do this in Excel, the Ctrl + [ and Ctrl + ] shortcuts are very useful for selecting direct precedents and direct dependents.<\/p>\n<p>We used the approach above to find an error with the Other Long-Term Assets:<\/p>\n<p><img decoding=\"async\" class=\"wp-image-31842 size-large aligncenter\" title=\"Other Long-Term Assets Links\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114532\/03-Other-Long-Term-Assets-1024x642.jpg\" alt=\"Other Long-Term Assets Links\" width=\"1024\" height=\"642\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114532\/03-Other-Long-Term-Assets-1024x642.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114532\/03-Other-Long-Term-Assets-300x188.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114532\/03-Other-Long-Term-Assets-768x481.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114532\/03-Other-Long-Term-Assets-1536x963.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114532\/03-Other-Long-Term-Assets.jpg 1742w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p><img decoding=\"async\" class=\"wp-image-31843 size-large aligncenter\" title=\"Other Long-Term Assets Cash Flow Statement Issue\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114551\/04-Other-Long-Term-Assets-CFS-Issue-1024x811.jpg\" alt=\"Other Long-Term Assets Cash Flow Statement Issue\" width=\"1024\" height=\"811\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114551\/04-Other-Long-Term-Assets-CFS-Issue-1024x811.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114551\/04-Other-Long-Term-Assets-CFS-Issue-300x238.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114551\/04-Other-Long-Term-Assets-CFS-Issue-768x608.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114551\/04-Other-Long-Term-Assets-CFS-Issue-1536x1216.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114551\/04-Other-Long-Term-Assets-CFS-Issue.jpg 1738w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Step_3_If_You_Havent_Fixed_the_Balance_Sheet_Yet_Review_the_Cash_Flow_Statement\"><\/span><strong>Step 3: If You Haven\u2019t Fixed the Balance Sheet Yet, Review the Cash Flow Statement<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If you\u2019ve finished the Balance Sheet but haven\u2019t made it balance yet, move to the Cash Flow Statement.<\/p>\n<p><strong>Focus on non-zero, unhighlighted line items because these are the ones that haven&#8217;t yet been accounted for on the BS.<\/strong><\/p>\n<p>By definition, they <em>must<\/em> be responsible for the discrepancy.<\/p>\n<p>You verify this by pressing the Ctrl + ] shortcut on each one to select direct dependents and see what it flows into, if anything.<\/p>\n<p>If you find an item on the CFS that is <em>not<\/em> linked to anything on the BS, go back to the BS and link it to the most appropriate line.<\/p>\n<p>If you can\u2019t figure out what it matches, link it to Equity as the \u201ccatch-all\u201d (a bit of a hack, but it works for last-minute fixes at 3 AM).<\/p>\n<p>In this model, we found an issue with Deferred Taxes by using this approach:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-31844 size-large\" title=\"Deferred Taxes - Missing Link\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114636\/05-Deferred-Taxes-1024x440.jpg\" alt=\"Deferred Taxes - Missing Link\" width=\"1024\" height=\"440\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114636\/05-Deferred-Taxes-1024x440.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114636\/05-Deferred-Taxes-300x129.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114636\/05-Deferred-Taxes-768x330.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114636\/05-Deferred-Taxes-1536x660.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114636\/05-Deferred-Taxes-2048x880.jpg 2048w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p>After fixing both these mistakes, though, <strong>the<\/strong> <strong>Balance Sheet was still not balancing:<\/strong><\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-31845 size-large\" title=\"Balance Sheet Not Balancing\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114704\/06-Balance-Sheet-Not-Balancing-1024x211.jpg\" alt=\"Balance Sheet Not Balancing\" width=\"1024\" height=\"211\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114704\/06-Balance-Sheet-Not-Balancing-1024x211.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114704\/06-Balance-Sheet-Not-Balancing-300x62.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114704\/06-Balance-Sheet-Not-Balancing-768x158.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114704\/06-Balance-Sheet-Not-Balancing-1536x316.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114704\/06-Balance-Sheet-Not-Balancing.jpg 1731w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p><strong>In cases like this, one common issue is that historical statements are not accurate due to inconsistent data and rounding errors.<\/strong><\/p>\n<p>It\u2019s also worth checking the \u201cNet Change in Cash\u201d calculations in all periods, but for a small, constant difference like this, it\u2019s more likely an issue with the historical statements.<\/p>\n<p><strong>One common problem is that the Cash at the bottom of the CFS may not match the Cash on the Balance Sheet:<\/strong><\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-31846 size-large\" title=\"Mismatched Cash Numbers on the Statements\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114736\/07-Mismatched-Cash-1024x388.jpg\" alt=\"Mismatched Cash Numbers on the Statements\" width=\"1024\" height=\"388\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114736\/07-Mismatched-Cash-1024x388.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114736\/07-Mismatched-Cash-300x114.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114736\/07-Mismatched-Cash-768x291.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/08\/27114736\/07-Mismatched-Cash.jpg 1477w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p>This problem is tricky to locate because the historical Balance Sheet still balances \u2013 since the Cash there is hard-coded and not linked to the Cash Flow Statement.<\/p>\n<p>But since the Cash number in the <em>first projected period<\/em> starts from a slightly different baseline Cash, the Balance Sheet will immediately go out of balance in Year 1.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Step_4_If_This_Still_Doesnt_Work%E2%80%A6\"><\/span><strong>Step 4: If This Still Doesn\u2019t Work\u2026<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If you still cannot find the problem after following this entire process, consider consolidating and simplifying the model to reduce the number of line items.<\/p>\n<p><strong>Simply by reducing the line items on both statements, you often \u201cfix\u201d these issues because you end up deleting the errors.<\/strong><\/p>\n<p>Yes, it takes more time than reviewing the statements and looking for errors, but after a certain point, it\u2019s faster to aim for the answer you <em>deserve<\/em> rather than the one you <em>need<\/em>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A Balance Sheet goes &#8220;out of balance&#8221; when Total Assets does not equal Liabilities + Equity; you can follow the 4-step process outlined here to fix this problem methodically, but you should also consider simplifying and consolidating your financial model if you keep running into this issue.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-31839","biws_kb","type-biws_kb","status-publish","hentry","kb_category-3-statement-models"],"acf":[],"_links":{"self":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb\/31839","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb"}],"about":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/types\/biws_kb"}],"wp:attachment":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/media?parent=31839"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}