Negative balance sheet

sajjad

Hi,
can balance sheet be negative (both assets and liability are negative amounts).

Loopster

Technically you can have a negative balance sheet if the owners equity were to become a negative, but that's a complicated scenario.

You won't have negative assets. You can't have a negative value of a vehicle, you can't have a negative fixtures & fittings value, you can't have negative equipment value. If your bank is overdrawn this becomes a current liability. So technically it is possible, but highly unlikely.

stevef

In the sector I work in, using IFRS, the actuarially calculated defined benefit pension liability can dwarf the other net assets. The pension liability will create a negative pension reserve, so both both parts of balance sheet are negative (minus £343 million in my case).

sajjad

Hi, thank you for comment. I understand Assets can not be negative, but in my case i am using QuickBooks Pro accounting software and we have overdraft now since the system does not automatically change the negative bank account as short term liability therefore the assets are being negative and also the liability and equity is negative. So i am just confused whether is that ok

CeeJaySix

Where you put the overdraft will no impact on equity (which can be negative - though in that case you should be looking at whether the company is solvent and/or a going concern).

It should be included in current liabilities for stat accounts. For management accounts, it depends on the users preference in my experience.