Chapter 7
Worksheet for a Service Business
Consistent Reporting
• General Ledger accounts contain info
needed by managers and owners
• before if can be used, it must be
analyzed, summarized & reported
• When the same accounting procedures
are used in the same way it is called
Consistent Reporting
7.1 Creating a Worksheet
• Fiscal Periods- length of time for which
a business summarized and reports
financial information (accounting time
period)
• Many businesses use a 1-year fiscal
period (because of federal and state tax
reports once a year)
• Encore uses a 1 month period (starting
August 1)
7.1-Worksheet
• Work Sheet- a columnar accounting form
used to summarize the general ledger
information needed to prepare financial
statements
• Used for four reasons:
•
Summarize general ledger account balances to prove
debits=credits
•
To plan needed changes to bring account balances
up to date
•
Separate general ledger account balances
•
Calculate net income/net loss in fiscal period
7.1 Preparing Worksheet Heading
• Name of Company
• Name of Report (Worksheet)
• Date of Report (For Year Ended)
7.1 Preparing a Trial Balance on a
Worksheet
• Trial Balance- the totals of all debit and
credit account balances shown in a
proof of equality
• This information is taken from general
ledger balances
• Account titles are listed in the same
order as the Chart of Accounts
7.1 Preparing a Trial Balance
Steps
•
Write the general ledger account titles
•
Write the general ledger debit account balances in Trial
Balance Debit Column. Write the general ledger credit
account balances in Trial Balance Credit Column.
Leave a blank space if there is no balance
•
Rule a single line across the two Trial Balance columns
below the last line. (Show these columns need to be
totaled)
•
Add both Trial Balance Debit and Credit columns. (If
they don’t =, recheck general ledger balances and
math)
•
Write totals below single line
•
Rule double lines
7.1 Review
• Terms Review
• Audit Your Understanding #1-2
• Work Together #3
• On Your Own #4
7.2 Planning Adjusting Entries on
Worksheet
• Please read page 154
• Adjustments- changes recorded on a
work sheet to update general ledger
accounts at the end of fiscal period
7.2 Supplies Adjustment
• Write the debit amount in the work
sheet’s Adjustment Debit column:
Supplies Expense
• Write the credit amount in the
Adjustment Credit column: Supplies
• Label the two parts of the adjustment
with a small letter (a)-identifies to parts
of the same adjustment
7.2 Prepaid Insurance Adjustment
• On August 31, Ms. Trevino checked the
insurance records and found that the
value of insurance coverage remaining
was $1,100.00 (used 100.00 in period).
• How can this be shown in the work
sheet as an adjustment?
7.1 Proving the Adjustments
Column of a Work Sheet
• After all adjustments are recorded in a
work sheet’s Adjustments column, the
equality of debits and credits for the two
columns is proved by totaling and ruling
the two columns
7.2 Review
• Terms Review
• Audit Your Understanding #1-2
• Work Together #3-4
• On Your Own #5-6
7.3 Extending Financial Statement
Information on a Work Sheet
• Extending Balance Sheet Account
Balances on a Work Sheet
• Show balances from the Balance Sheet
on the Work Sheet
• See page 159
Extending Account Balances
• Extend the balance of each account to
Debit Column (without adjustments)
• Calculate up-to-date Adjusted Balances
• Extend the balance of each account to
Credit Column (without adjustments)
Extending Income Statement
Balances
• Income Statement- a financial
statement showing the revenue and
expenses for a fiscal period
• Extend Sales account to Credit Column
• Extend Expenses without Adjustments
• Extend Expenses with Adjustments
Recording Net Income AND Totaling
• Net Income- difference between total
revenue and total expenses; when
revenue is greater
• Rule a single line across Income and
Balance
• Total Income and Balance Sheet Columns
• Calculate Net Income (write Net Income)
• Rule a single line below the Net Inc Amts
• Add subtotal and net income for each
column
• Write proving totals and Rule a double line
Preparation Summary
• Between page 160 and 161
7.3 Review: p. 163
• Terms Review
• Audit Your Understanding #1-4
• Work Together #5-7
• On Your Own # 8-10
7.4 Finding and Correcting Errors
• CALCULATION ERRORS- When two
columns are not in Balance
• if difference is 1 like $.01, $.10, $1.00
• check Addition
• if difference is divisible by 2
• check for correct recording
• if difference is divisible by 9
• check for transposed numbers
• LOOK for OMITTED Amounts
Correcting
• An Incorrect Amount• Draw a line through incorrect amount
• Write correct amount
• Recalculate Balances and correct
• Posting to the wrong column-
• Draw a line through incorrect item
• Record posting in correct column
• Recalculate balance
Errors, cont.
• Checking General Journal• Do Debits = Credits?
• Is each general journal entry amount
recorded in correct column?
• Is info in Account Title Correct for each
entry?
• Are all transactions recorded?
• WORK CAREFULLY TO PREVENT ERROR
7.4 Review- p. 167
• Audit Your Understanding #1-4
• Work Together # 4-6
• On Your Own # 7-9