CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Chapter 6

How do you create a Worksheet & Plan Adjusting Entries on a Work Sheet?

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Fiscal Period

Consistent Reporting The same accounting procedures must be followed in the same way

each accounting period in order to make information comparablebetween fiscal periods

Fiscal period Length of time for which a business summarizes and reports

financial information (also known as accounting period) Businesses can choose any length of time it wishes – most choose a

year (TechKnow chose 1 month because it’s a new business) Can begin on any date – most choose first day of month Businesses usually choose a one-year fiscal period to end during a

time when they are least busy Financial information can be analyzed, summarized, and reported at

any time, but it must be done at the end of a fiscal period

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LESSON 6-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Worksheet

Worksheet – a columnar accounting form used to summarize the general ledger information needed to prepare financialstatements

Accountants use worksheets for four reasons:1. To prove that debits = credits in the general ledger (trial balance)2. To plan needed changes to GL accounts to bring balances up to

date3. To separate GL account balances according to the financial

statements to be prepared4. To calculate the amount of net income or net loss for a fiscal period

Planning tool not permanent record – pencil is used

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LESSON 6-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

PREPARING THE HEADING OF A WORK SHEET

Trial Balance – proof of the equality of debits and credits in a general ledger Information for the TB is taken from the general ledger GL accounts are listed on a trial balance in the same order as they

are listed on the chart of accounts All accounts are listed – even if they do not have a balance

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LESSON 6-1

page 153

Name of Company1Name of Report2

Date of Report3

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-1

1. Write the general ledger account titles.

2. Write the general ledger debit account balances. Write the general ledger credit account balances.

4. Add both the Trial Balance Debit and Credit columns.

3. Rule a single line across the two Trial Balance columns.

5. Write each column’s total below the single line.

6. Rule double lines across both Trial Balance columns.

PREPARING A TRIAL BALANCE ON A WORK SHEET page 154

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Planning Adjustments on a Work Sheet

Accounting Concept: matching revenue with expenses Expenses associated with revenue earned must be recorded in the

same accounting period EXAMPLE: supplies and prepaid insurance…must be brought up to date

at end of fiscal period (unrealistic to record what is used on daily basis, but they were used to earn revenue during fiscal period)

Adjustments Changes recorded on a work sheet to update general ledger

accounts at the end of a fiscal period Adjustments are not recorded in journal and posted until the accuracy

is proved on the work sheet

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LESSON 6-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-2

SUPPLIES ADJUSTMENT ON A WORK SHEET

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page 158

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1. Write the debit amount.2. Write the credit amount.3. Label the two parts of this adjustment.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-2

PREPAID INSURANCE ADJUSTMENT ON A WORK SHEET page 159

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1. Write the debit amount.2. Write the credit amount.3. Label the two parts of this adjustment.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-2

PROVING THE ADJUSTMENTS COLUMNS OF A WORK SHEET page 160

3. Rule double lines.

2. Add both the Adjustments Debit and Credit columns. Write each column’s total.

1. Rule a single line.

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Financial Statements

Balance Sheet Financial statement that reports assets, liabilities, and owner’s

equity ON A SPECIFIC DATE Accounting equation (A = L + OE) These account balances in the Trial Balance columns are extended

to balance sheet section of work sheet Income statement

Financial statement showing the revenue and expenses for a fiscal period

Revenue & expense account balances in the Trial Balance columns are extended to income statement section of the work sheet

Net Income Difference between total revenue and total expenses when total

revenue is greater

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LESSON 6-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-2

(b) 10000

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(b) 10000(a) 71500

(a) 71500

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11000

10000102500120000

200005000

50000062500

35650021300

280030000

881500 881500 81500 81500 146600 356500 734900 525000

356500 734900

1000031000

11000020000

5000500000

62500

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11000

21300

280030000

356500

10000

71500

7

209900 209900Net Income 89

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356500 734900

4964001000015000

49640010000

1500

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-3

CALCULATING AND RECORDING A NET LOSS ON A WORK SHEET page 165

2. Totals3. Net loss4. Extend net loss

1. Single rule 2

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Net loss – difference between total revenue and total expenses when total expenses are greater

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-2

PREPARING A WORK SHEET page 160 C

1. Write the heading.2. Record the trial balance.3. Record the supplies adjustment.4. Record the prepaid insurance adjustment.5. Prove the Adjustments columns.6. Extend all balance sheet account balances.7. Extend all income statement account balances.8. Calculate and record the net income (or net loss).9. Total and rule the Income Statement and Balance Sheet

columns.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-2

TERM REVIEW

fiscal period work sheet trial balance adjustments

page 161

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 6-4

How do you find and correct errors on the Work Sheet?

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Checking for Typical Calculation Errors

When the two columns are not in balance, here are some quick checks: The difference is 1, such as .01, .10, 1, or 10. The error is most

likely in addition. Add the columns again. The difference can be divided evenly by 2. Look for the amount

divided by 2 and check to make sure it has been recorded in the correct column.

The difference can be divided evenly by 9. Look for transposed numbers or a “slide”. A slide occurs when numbers are moved to the right or left in an amount column.

The difference is an omitted amount. Look for an amount equal to the difference.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-4

CORRECTING AN ERROR IN POSTING TO THE WRONG ACCOUNT page 168

1. Draw a line through the entire incorrect entry. Recalculate the account balance and correct the work sheet.

2 Correct entry

1 Incorrect entry

2. Record the posting in the correct account. Recalculate the account balance, and correct the work sheet.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-4

CORRECTING AN INCORRECT AMOUNT

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page 169

1. Draw a line through the incorrect amount.2. Write the correct amount just above the correction in the same space.3. Recalculate the account balance, and correct the account balance on

the work sheet.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

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LESSON 6-4

CORRECTING AN AMOUNT POSTED TO THE WRONG COLUMN

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page 169

6. Recalculate the account balance, and correct the work sheet.5. Record the posting in the correct amount column.4. Draw a line through the incorrect item in the account.

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