Course Outline
Join PRO

What is meant by events after the balance sheet date?

Author:
Harold Averkamp, CPA, MBA

Definition of Events After Balance Sheet Date

Events after the balance sheet date are significant financial events that occur after the date of the balance sheet but prior to the date that the financial statements are issued.

For instance, between a company’s balance sheet date of December 31, 2023 and the time that the financial statements are distributed on January 31, 2024, it is possible a significant event occurs or information becomes known that is important to the users of the December 31 financial statements. The following are two types of events/information that require the accountant’s consideration:

  • There is an event that provides additional information about conditions that existed on December 31
  • There is an event that does not change the December 31 amounts, but needs to be disclosed to the users of the December 31 financial statements

The above items are often referred to as subsequent events or post balance sheet events.

Example of Events After Balance Sheet Date

To illustrate the first situation, assume a customer owes a corporation $200,000 on December 31 and the corporation believed that the customer’s receivable would be collected in full. (Therefore, the corporation did not have any allowance for doubtful accounts.) On January 28 the corporation learns that the customer filed for bankruptcy and none of the customer’s balance of $200,000 will be collected. If the customer’s financial condition on December 31 was already in bankruptcy condition, the corporation must adjust its December 31 balance sheet by reducing its net receivables by $200,000 and reporting bad debts expense of $200,000 on its income statement for the year 2023.

An example of the second situation is a loss arising from a catastrophe occurring on January 16, 2024. The amounts reported as of December 31, 2023 will not be adjusted since those amounts were correct as of December 31. However, the readers of the December 31, 2023 financial statements should be informed through a disclosure that a significant loss had occurred to the company’s financial position since December 31.

Join PRO to Track Progress

Advance Your Accounting and Bookkeeping Career

Must Watch image

  • Perform better at your job
  • Get hired for a new position
  • Understand your small business
  • Pass your accounting class
Watch the Video
Certificates of Achievement

Earn Our Certificates of Achievement

Certificates of Achievement
  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Accounts Receivable and Bad Debts Expense
  • Depreciation
  • Payroll Accounting
View PRO Plus Features

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,651 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Bookkeeping Study Guide
Managerial Study Guide
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Accounts Receivable and Bad Debts Expense
Certificate - Depreciation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 2,651 Testimonials

Take the Tour Join Pro Upgrade to Pro Plus