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Loss is not recorded directly in the balance sheet. The balance sheet shows the financial condition of a company on a particular date. It shows the assets, liabilities, and owners equity of the business.
If there is a tax liability (taxes owed), the balance sheet will show it. If there is a tax loss, the balance sheet will not have that amount.
Net loss decreases the retained earnings/owners equity. If you are using a ten column worksheet, preparing the income statement and balance sheet will be easy. Simply transfer the balance sheet items to the balance sheet column and the income statement items to the income statement columns on the worksheet and use it to make the financial statements. (Net income is added to retained earnings, increasing owners equity. Net loss is decreased from retained earnings, decreasing owners equity. The balance sheet would show the owners equity and retained earnings amounts, which accounts for any income or losses.)
Taxes are deducted from Income Before Tax. Hence, Net Loss (or Net Income) would account for any tax expense the business incurred. Tax expense is included in the income statement.
Net Losses can reduce income tax (including in future years), so speak to your tax accountant about that.
Using accounting software is easier because financial reports are made automatically with a click of a button. You just need to record the transactions accurately.
