Last year, I was honest with the (retail tax preparation only) client and I told her that, as an EA, I don't have any formal education or experience with providing the required adjusted entries. But proceeded with us anyway and I gave her some simple adjustments so that the balance sheet matches the depreciation I took on the tax return. I'm not an accountant, but I've learned some simple bookkeeping fundamentals over the years.
This year she is back and asking for services again, as she is happy with us as her tax preparer and does not wish to go elsewhere.
Again, I disclaimed my lack of experience with adjusting entries, and admitted that if she wants these, she's definitely better off with a CPA.
She came back with, "well, how important is it if we don't do it, or if it's not right? What kind of problems would I be looking at down the road?"
I don't know the answer. I can sort of provide them, but I don't know if it's correct.
I kind of feel like, in an audit, "it doesn't matter that much". If the income and expenses are categorized and accurate, and if the equity flow to and from the business is accurately accounted for, that's all they really care about.
I picture my (surprisingly smart and tax compliant) body shop guy who gives me a simple spreadsheet, his payroll reports, and an ending business bank balance (no software or bookkeeper). He's very accurate and compliant and he does not co-mingle anything. There are no entries to make anywhere - and he's just fine and legitimate.
But then my spider sense asks, "well then why does everybody do these entries? I must be ignorant of something here."