A dental practice balance sheet is a dated report of assets, liabilities, and owner equity. Review it by matching each significant balance to supporting evidence for the same cutoff, then investigate unexplained amounts. Equal totals are necessary, but they do not prove that the underlying accounts are correct.
The IRS distinguishes this point-in-time report from the income statement's activity over a period in Publication 583. Your accountant should identify the accounting basis and any items that basis omits before you treat the report as a complete picture of obligations.
The process below is an owner review method. It does not replace preparation or adjustment of the books by a qualified accounting professional.
Establish exactly whose balances you are reviewing
Put the entity name, included locations, statement date, basis, and report version at the top of the review. Request the prior month's final balance sheet, account detail, and supporting schedules alongside the current report.
Keep personal accounts and a separately owned building outside the practice statement unless the reporting scope expressly includes them. If the practice owes money to a related entity, ask for the agreement and the corresponding balance on the other entity's books.
Confirm that the current opening balances still agree with the previous close. If someone edited a prior-period transaction, identify the change before trying to explain this month's movement. Otherwise, the review may be comparing two different versions of history.
For cash-basis or modified-cash reports, ask whether receivables, unpaid vendor bills, or other obligations appear. If they do not, request a clearly labeled supplementary schedule. Do not quietly paste selected accrual balances into a cash-basis statement.
Give every major account a supporting document
Create a review list with the ledger balance, supporting amount, difference, preparer, reviewer, and resolution date. Evidence should establish both the amount and what it represents.
| Account group | Evidence to request | Question to resolve |
|---|---|---|
| Bank cash | Completed account reconciliations | Does each reconciled balance match this statement? |
| Net receivables | Dated aging and adjustment schedules | Do credits and reviewed allowances explain the net amount? |
| Prepayments and deposits | Agreements and remaining-benefit schedules | What future benefit or refundable amount remains? |
| Equipment and improvements | Asset register, invoices, disposal entries | Are the recorded assets still owned and the depreciation entries current? |
| Payables and accrued costs | Vendor detail, payroll and tax schedules | Are reported balances supported, including unpaid items at cutoff? |
| Borrowings | Lender statements and repayment schedules | Does the principal balance and maturity classification agree? |
| Owner accounts | Contributions, distributions, and loan documentation | What transaction created each movement? |
Use the bank-reconciliation workflow to resolve cash differences. It proves the individual cash accounts; this broader review still needs the remaining asset, obligation, and equity schedules.
For receivables, investigate unsupported credits and old balances through the accounts-receivable review. Do not assume an aging total is the collectible amount, or erase an old account merely to make the balance sheet look cleaner.
Review classification without mistaking it for availability
The SBA distinguishes current assets from longer-lived resources and describes current liabilities as amounts due within one year. Its glossary also identifies depreciation as a noncash expense that reduces an asset's carrying amount. Use those basic distinctions while leaving the practice's exact classifications to its accountant. SBA financial glossary
Ask specifically about the upcoming principal portion of long-term loans, restricted cash, security deposits, and patient advances or credits. The account name alone does not settle the accounting treatment. Request the relevant schedule and basis for the classification.
An equipment balance also is not a resale quote. Request gross cost and accumulated depreciation separately, with additions and disposals explained. A fully depreciated item can still be in use; a missing item can remain in an inaccurate register.
The working-capital calculation uses the current portions of this statement. Complete the balance review first so that a later ratio does not give unsupported amounts an appearance of precision.
Test the totals and an equipment rollforward
The following month-end balances are entirely hypothetical. Assume the accountant has approved an accrual presentation and all listed classifications. No additional assets or obligations are omitted from this simplified example.
| Assets | Amount | Liabilities and equity | Amount |
|---|---|---|---|
| Cash | $60,000 | Payables and accrued costs | $45,000 |
| Net receivables | $70,000 | Current loan principal | $20,000 |
| Prepayments | $10,000 | Long-term loan principal | $140,000 |
| Net equipment | $160,000 | Total owner equity | $105,000 |
| Security deposit | $10,000 | — | — |
| Total | $310,000 | Total | $310,000 |
Assets of $310,000 equal liabilities of $205,000 plus equity of $105,000. That check alone does not explain the $160,000 equipment amount.
Suppose the asset register starts with $220,000 of cost and $70,000 of accumulated depreciation. During the month, a $20,000 asset is added, an old item with $15,000 cost and $10,000 accumulated depreciation is removed, and $5,000 of depreciation is recorded.
Ending cost is $225,000: $220,000 + $20,000 − $15,000. Ending accumulated depreciation is $65,000: $70,000 − $10,000 + $5,000. The net amount is therefore $160,000.
Now verify the addition invoice and disposal evidence. If the old asset never left the practice, the arithmetic still works, but the supporting story does not. Ask the accountant to resolve the transaction and its other entries rather than inserting a balancing figure.
Explain owner equity without treating it as a valuation
Ask for a movement schedule connecting opening equity to closing equity. In a simplified illustration, $90,000 of opening equity plus $25,000 of net income and $5,000 of owner contributions, less $15,000 of distributions, gives the $105,000 closing balance above. Other adjustments would need separate explanation.
Have the accountant identify the correct equity accounts and distinguish documented owner loans from contributions. An unexplained opening-balance or suspense account deserves investigation, not a permanent place in the report.
Book equity is not an offer to buy the practice and should not be used as an expected sale price. The practice-valuation guide addresses that separate decision.
Close the review with three groups: supported balances, supported balances that raise a business concern, and unresolved balances that need accounting work. For each unresolved item, name the missing evidence, responsible person, and due date. A useful month-end snapshot is one the owner can trace, not merely one with matching totals.
