The Six-Column Work Sheet
Chapter 8
The Accounting Cycle
These steps are performed
frequently during a cycle
1. Collect and verify source
documents
2. Analyze each transaction
3. Journalize each
transaction
4. Post to the ledger
5. Trial balance
These steps are only
performed at the end of an
Accounting Cycle
6. Work Sheet
7. Prepare financial
statements
8. Journalize and post
closing entries
9. Prepare a post-closing
trial balance
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What is the purpose of a Work Sheet?
• A Work Sheet is a working paper used to
collect information from the ledger accounts
in one place
• Sections of a work sheet
– The heading
– The Account Name section
– The Trial Balance section
– The Income Statement section
– The Balance Sheet section
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Report Headings
• Headings answer the questions: Who, What
and When
Ex:
Roadrunner Delivery Service ---Who
Work Sheet ---What
For the Month Ended October 31, 2013 ---When
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The Account Name Section and
Trial Balance Section
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This information
comes from the
ledger and is filled
out much like a
trial balance report
is filled out.
Ruling and Totaling a Work Sheet
• Ruling means to draw
a line. In accounting a
single rule means that
the entries above the
rule are ready to be
totaled. After the
totals have been
proven to equal, a
double rule is drawn
under them.
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The Balance Sheet and Income
Statement Sections
• These are both financial statements prepared
at the end of the accounting period. The work
sheet organizes the information for these
reports
• The Balance Sheet Section – contains Assets,
Liabilities, and Owner’s Equity accounts
• The Income Statement Section – contains the
Revenue and Expense accounts
• Single rule and then total all columns.
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Balance Sheet and Income Statement
Accounts
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Balance Sheet and Income Statement
Totals
Showing Net Income or Net Loss
• Matching Principal – according to GAAP
expenses incurred in an accounting period
must match with the revenue earned in the
same period
• Net Income – the amount of revenue that
remains after expenses for the period have
been subtracted
• Net Loss – happens when total expenses
exceed total revenue
To Record Net Income or Loss
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• Determine if Revenue or Expenses is the larger
number, then subtract the two numbers.
• Skip a line under the account names and write Net
Income if the Revenue column is higher or Net Loss if
the Expense column is higher.
• Write the difference between the two columns on the
same row as the words New Income or Net Loss under
the smaller of the two totals
• On the same line, write that same number under the
total in the Balance Sheet section that is opposite of
the Income Statement column.
– Ex If you wrote it in the Debit column on the Income
Statement section then write it in the Credit column on the
Balance Sheet section
Worksheet with Net Income
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It Stands to Reason
• If Revenue (a credit) is larger than expense the
business made a profit, that amount is then
recorded under the debit column to bring
expenses equal to revenue.
• If the business made a profit, that amount
would be added to the Capital account (a
credit) which is the offset of the amount
added to the expense account as a debit.
Completing the Work Sheet
• Draw a single rule under the entire Net
Income or Net Loss area.
• Add all columns down
• Check that the debit and credit columns of the
Income Statement balance and that the debit
and credit columns of the Balance Sheet
columns balance
• Once everything is in balance, double rule the
entire totals line.
Complete Work Sheet
A Net Loss