Chapter 6
Worksheet for a Service Business
Today in Accounting, 12/15/14
• Get a copy of the book! Open to
Page 157
• Be prepared to understand the
•
•
purpose of adjustments and the
correct way to record them in
the worksheet!
We will then review how to
create the worksheet
You will use the rest of class to
retake the test or complete
makeup work
Terminology
fiscal period-the length of time for
which a business summarizes and
reports financial information.
work sheet-a columnar accounting
form used to summarize the
general ledger information
needed to prepare financial
statements.
trial balance-a proof of the equality
of debits and credits in a general
ledger.
Explanation
Reporting
accounting
information for a
fiscal period is
very
important…Why
????????
A fiscal period
can begin on any
date. However,
most businesses
begin their fiscal
periods on the
first day of a
month.
PREPARING THE HEADING OF
page 153
A WORK SHEET
1
2
Name of Company
Name of Report
3
Date of Report
A WORK SHEET IS A PLANNING
DOCUMENT
PREPARING THE HEADING OF
page 153
A WORK SHEET
ALL FINANCIAL STATEMENT HEADINGS
ANSWER THE QUESTIONS: WHO?
WHAT? AND WHEN?
A WORK SHEET IS A PLANNING
DOCUMENT
6
PREPARING A TRIAL BALANCE
ON A WORK SHEET
•ALL ACCOUNTS ARE LISTED IN CHART OF
ACCOUNTS ORDER ON A WORK SHEET
WHETHER THEY HAVE A BALANCE OR NOT.
•ACCOUNT TITLES ARE WRITTEN IN FULL
UNLESS THERE IS NOT ENOUGH ROOM. IF
THERE IS NOT ENOUGH ROOM,
ABBREVIATIONS CAN BE USED
•ACCURACY IS IMPORTANT WHEN COPYING
ACCOUNT BALANCES TO THE WORK SHEET
COLUMNS
PREPARING A TRIAL BALANCE
ON A WORK SHEET
page 154
2
1
3
5
8
1. Write the general ledger
account titles.
2. Write the general ledger
debit account balances.
Write the general ledger
credit account balances.
3. Rule a single line across the
two Trial Balance columns.
4
4. Add both the Trial Balance
Debit and Credit columns.
5. Write each column’s total
below the single line.
6. Rule double lines across
both Trial Balance columns.
6
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.
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?
SUPPLIES ADJUSTMENT ON A
WORK SHEET
Supplies Account Balance – Supplies on Hand= Supplies Used
$1025.00 -
$310.00 =
$715.00
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.
14
PREPAID INSURANCE
ADJUSTMENT
ON A WORK SHEET
Prepaid Insurance Balance – Insurance Coverage Remaining
(Unused) = Insurance Coverage Used
$1200.00 -
$1100.00 =
$100.00
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.
16
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.
18
3
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.
19
20
1
21
1
2
496400
10000
15000
10000
102500
120000
6
(a)
(b)
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
22
20000
5000
500000
3
62500
Net Income
496400
10000
15000
10000
31000
110000
The Difference Is 1
• For example, if the totals of the
two columns are debit $14,657
and Credit $14658, the
difference between the two
columns is $1.00. The error is
most likely in addition.
• Add the columns again.
The Difference Can Be Divided
Evenly By 2
• For example, the difference between two
column totals is $48, which can be divided
by 2 with no remainder. Look for $24
amount in the Trial Balance columns of the
work sheet. If the amount is found, check
to make sure it has been recorded in the
correct Debit or Credit column.
The Difference Can Be Divided
Evenly By 2
• A $24 debit amount recorded in a credit
column results in a difference between
column totals of $48.
• If the error is not found on the work sheet,
check the general ledger accounts and
journal entries. An entry for $24 may have
been recorded in an incorrect column in the
journal or in an account.
The Difference Can Be Divided
Evenly by 9
• For example, the difference between two
columns is $45. which can be divided by 9
with no remainder. When the difference
can be divided equally by 9, look for
transposed numbers such as 54 or 19
written as 91.
• Also, check for a “Slide”. A “Slide” occurs
when numbers are moved to the right or
left in an amount column. For example, $12
is recorded as $120 or $350 is recorded as
$35.
The Difference Is An Omitted
Account.
Look for an amount equal to the difference. If the
difference is $50, look for an account balance of $50
that has not been extended.
Look for any $50 amount on the work sheet and
determine if it has been handled correctly.
Look in the accounts and journals for a $50 amount and
check if that amount has been handled correctly.
Failure to record a $50 account balance will make a
work sheet’s column totals differ by $50.
Checking For Errors in the Work
Sheet.
1.Check for Errors in the Trial
Balance Column
2.Check for Errors in the
Adjustment Columns
3.Check for Errors in the Income
Statement and Balance Sheet
Columns.
Check for Errors in the Trial
Balance Column
1.Have all general ledger
account balances been copied
in the trial balance column
correctly?
2.Have all general ledger
account balances been recorded
in the correct Trial Balance
Columns?
Check for Errors in the
Adjustment Columns
Do the Debits equal the Credits for
each adjustment?
Use the small letters that label each
part of an adjustment to help check
accuracy and equality of debits and
credits.
Is the amount for each adjustment
correct?
Check for Errors in the Income
Statement and Balance Sheet
Columns.
 Has each amount been copied correctly when
extended to the Income Statement or Balance Sheet
column?
 Has each account balance been extended to the
correct Income Statement or Balance Sheet
columns?
 Has the net income or net loss been recorded in the
correct Income Statement or Balance Sheet
columns?
 Has the net income or net loss been recorded in the
correct Income Statement or Balance Sheet
Columns.
POSTING TO THE WRONG
ACCOUNT
2
page 168
Correct entry
1
Incorrect entry
1. Draw a line through the entire incorrect entry. Recalculate the account
balance and correct the work sheet.
2. Record the posting in the correct account. Recalculate the account
balance, and correct the work sheet.
32
CORRECTING AN INCORRECT
AMOUNT
page 169
2
1
3
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.
3 Steps for correcting an incorrect amount in
the account.
33
CORRECTING AN AMOUNT
POSTED TO THE WRONG
COLUMN
2
1
3
5
4
6
4. Draw a line through the incorrect item in the account.
5. Record the posting in the correct amount column.
6. Recalculate the account balance, and correct the work sheet.
34
page 169
Check Your Understanding
• What is the first step in checking for
arithmetic errors when two column
totals are not in balance?
• What is the one way to check for an
error caused by transposed numbers?
• What term is used to describe an
error that occurs when numbers are
moved to the right or left in an
Amount Column.
Check Your Understanding
• What is the first step in checking for
arithmetic errors when two column
totals are not in balance?
• Subtract the smaller total from the
larger total to find the difference.
Check for Understanding.
What is the one way to check for
an error caused by transposed
numbers?
Answer- The difference between
the two column totals can be
divided evenly by 9.
Check for Understanding
•What term is used to
describe an error that occurs
when numbers are moved to
the right or left in an Amount
Column.
Answer: A slide
Aplia
• Work Together 6-4
•On Your own 6-4
•Application 6-4
•Chapter 6 Study Guide
•Century21accounting.com
Tutorial Test for
Chapter 6
Exit Ticket
•