Work Sheet for a
Merchandising Business
Review Accounting Cycle for
every Fiscal Period:
1.
2.
3.
4.
Work Sheet

A planning form to assist in creating
Financial Statements
 List of General Ledger Account
Balances

Adjustments needed for:
 Depreciation Updates
 Merchandise Inventory Value Updates


Inventory – amount of goods on hand –
on the floor of the retailer and in the
“back room” waiting to be put on the
merchandising floor
Merchandise Inventory - amount of
goods on hand FOR SALE – only on the
floor of the retailer
Reason for Adjustment to
Merchandise Inventory, M.I.

Throughout the fiscal period, no journal entries
have been made to the account, M.I., so the value
has stayed the same – this asset value is
inaccurate



When we buy merchandise to re-sell, the Purchases
account is affected
When we sell the merchandise to costumer, the Sales
account is affected
We need to update the M.I. value to reflect the
actual worth of inventory in the store

A physical inventory count must be performed.
Income Summary Account


Temporary account used to off-set
the adjusting entry to update
merchandise inventory
The Income Summary account is not
classified as an A, L, OE, R, or Ex

it is used when an account transaction
needs to be closed/updated (every debit
needs a credit
Transaction Example when the
M.I. value is less than it was at
the start of the FP
Beginning of fiscal period – Merchandise
inventory was worth $270, 480
 End of fiscal period Balance should be: $254, 640
 Merchandise Inventory value decreased by
$15, 840
 Adjustment:



Debit to Income Summary account - $15, 840
Credit to Merchandise Inventory account - $15, 840

Decreasing the account
Transaction Example when the
M.I. value is more than it was at
the start of the FP




Beginning of fiscal period – Merchandise inventory
was worth $300,480
End of fiscal period Balance should be: $310,480
Merchandise Inventory value increased by $10,000
Adjustment:

Debit to Merchandise Inventory account - $10, 000


Increasing the asset
Credit to Income Summary account - $10, 000
Adjusting Entries for Supplies
and Insurance

Calculate depreciation amount


Credit the asset
Debit the expense
Complete the Work Sheet


Many retailers use 10-column Work
Sheet because there are so many
adjustment transactions to update
Income Statement and Balance Sheet
are accurate and ready to be published