The net income (loss) per books amount that appears on Line 1 of Schedule M-1 Reconciliation of Income (Loss) per Books With Income (Loss) per Return is a calculated field and will change when an adjustment amount is entered on the other lines of the Schedule M-1. The calculation of line 1 is as follows:

For 1120:

Line 1 = (line 10 + line 8 + line 7) – (line 2 + line 3 + line 4 + line 5)

For 1065:

Line 1 = (line 9 + line 7 + line 6) – (line 2 + line 3 + line 4)

For 1120S:

Line 1 = (line 8 + line 6 + line 5) – (line 2 + line 3)

If the Schedule M-1 net income (loss) per books amount does not match the net income per books, an adjustment amount will need to be entered on the predetermined adjustment lines and/or the other adjustment worksheet.

The few predetermined adjustment lines on Schedule M-1 would include items such as the deductible portions of travel and entertainment expenses, depreciation, tax exempt interest and a worksheet to enter other adjustment amounts.