LESSON 6-2
Planning Adjusting Entries on a
Work Sheet
Objectives
•Define Accounting terms related to a
work sheet for a services business
organization organized as a
proprietorship.
•Identify accounting concepts and
practices related to a work sheet for a
service business organized as a
proprietorship.
• Plan Adjustments for supplies and
prepaid insurance.
Question for YOU!
How have we accounted for supplies up
to this point?
Answer: We have increased the asset
account, Supplies, when we purchase
supplies.
We have NOT recorded the use of
supplies. Today we will stress that if
this continues, the balance in the
supplies account will get larger and
larger, even though supplies are
being used each period.
New VOCAB TERM
ADJUSTMENTS: changes recorded
on a work sheet to update
general ledger accounts at the
end of a fiscal period. (p. 157)
Today’s lesson will discuss how to
analyze adjustments for supplies
and prepaid insurance.
Don’t look too excited!
Lesson 6.2
The concept Matching Expenses with
Revenue means that amounts that
helped earn revenue for a period
must be reported as expenses in the
same period.
Again, Today we are going to look how
adjustments are made for supplies
and insurance.
These adjustments will be planned on
the work sheet.
Example (Supplies)
A Company starts the accounting
with
two boxes of
If the period
company uses
four
boxes
of envelopes, the
envelopes
matching concept requires
that the cost of the four boxes
to be included with expenses
for the period. The cost of the
one remaining box must be
listed as an asset, Supplies.
Three additional boxes are
purchased during the period.
Good Habits
You should establish the habit of asking the
four questions to analyze each adjustment.
1.What is the balance of Supplies?
2.What should the balance be for this
account?
3.What must be done to connect the
account balance?
4.What adjustment is made?
Good Habits
The amount of the adjustment is the
amount of supplies used.
This amount will also be the balance of
Supplies Expense after the adjusting
entry.
After the adjusting entry, the balance
in the asset account, Supplies, is the
cost of the supplies still on hand.
There are Three Steps for a Supplies
Adjustment on a work sheet
SUPPLIES ADJUSTMENT ON A
WORK SHEET
page 158
2
3
1
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.
9
SUPPLIES ADJUSTMENT ON A
WORK SHEET
Supplies Account Balance – Supplies on Hand= Supplies Used
$1025.00 -
$310.00 =
$715.00
PREPAID INSURANCE
ADJUSTMENT
ON A WORK SHEET
page 159
2
3
1
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.
11
PREPAID INSURANCE
ADJUSTMENT
ON A WORK SHEET
Prepaid Insurance Balance – Insurance Coverage Remaining
(Unused) = Insurance Coverage Used
$1200.00 -
$1100.00 =
$100.00
PROVING THE ADJUSTMENTS
COLUMNS OF A WORK SHEET
•Reminder: If Debits equal Credits
for each adjustment, the total debits
and total credits in the Adjustments
columns must also equal.
•There are three steps for proving
the Adjustments columns of a work
sheet….
PROVING THE ADJUSTMENTS
COLUMNS OF A WORK SHEET
page 160
1
2
1. Rule a single line.
2. Add both the Adjustments Debit and Credit columns.
Write each column’s total.
3. Rule double lines.
14
3
PREPARING A WORK SHEET
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.
15
page
160 C
16
1
17
1
2
496400
10000
15000
10000
102500
120000
(a)
(b)
6
71500
10000
20000
5000
500000
62500
4
356500
356500
21300
(b)
10000
(a)
71500
2800
30000
11000
881500 881500
8
81500
21300
10000
7
2800
30000
71500
5
11000
81500 146600 356500 734900 525000
209900
209900
356500 356500 734900 734900
9
18
20000
5000
500000
3
62500
Net Income
10000
31000
110000
TERM REVIEW
Adjustments- changes recorded on a work sheet to
page 161
update general ledger accounts at the end of a fiscal
period. (p. 157)
19
To do:
APLIA 6.2
Work Together and On Your Own
Application Problem
Check Clarity for any missing assignments past due!