UNIT 4
ADJUSTMENTS, WORKSHEET, AND STATEMENTS
Adjusting Entries are needed because it is uneconomical to make changes daily to some accounts, and for others,
vital information is not known until the end of the account period. When analyzing these September 30
Adjusting Entries, consider the relevant account balances listed in the Trial Balance, the change described in the
transaction descriptions, and the relevant Journal Entries on page
8.
II.
DEBITS AND CREDITS
I.
TRIAL BALANCE
Quick
~
~R.I
+
LIABILITIES
CR..
DR.
+
I
CR..
OWNER'S
DR.
-
WITHDRAWAlS
+
I
REVENUE
DR. CR..
- I +
EXPENSES
~R'I~'
Clean Laundry Se:z:vice
Trial Balance
September 30, 1991
EOUITY
CR..
~R'I CR..
Cash
Accounts Receivable
Prepaid Advertising
Laundry Supplies
Laundry Equipment
Accounts Payable
Unearned Laundry Revenue
Capital, Darin Jones
Withdrawals, Darin Jones
Laundry Revenue
Washer7DI:yer
Expense
Telephone Expense
Sample Problem Adjustments
150
75
$350
$350
JOURNALIZING TRANSACTIONS
Liabilities
+
Owner IS Equity
a. One month of scheduled advertising appeared
in the school newspaper. See transaction 2 page 8.
Prepaid Advertising
DR.
Advertising Expense
10
10
I
b. A count of Laundry SUpplies revealed $5 worth on hand.
Laun~
20
Laundry Sqpplies
I
20
- Wednesday, September 30, 1991
ANALYZING TRANSACTIONS
I
$ 30
20
150
ADJUSTING JOURNAL ENTRIES
III.
Assets
$117
5
50
25
48
20
~ly
Expense
a. Advertising
Expense
Prepaid Advertising
To record advertising
expired.
CR..
10
10
b. Laundry Supply Expense
20
Laundry Supplies
To record Laundry Supplies
used.
20
c. Depreciation was taken on $48 of equipment with a useful
life of 4 years.
AcCt.U1lUlated
Depreciation
Expense,
Laundry Eq\l:i,pment
Depreciation,
Laundty ~ipment
I
1
1
I
Note: Depreciation is accumulated and subtracted
from the relevant asset on the Balance Sheet.
c. Depreciation
Expense,
Laundry Equipment
1
Accumulated Depreciation,
Laundry Equipment
September's Depreciation
1
recorded.
d. On Friday, October 2nd, Darin would pay his first enployee,
who worked Monday, Wednesday and Friday, $15 for the week.
Salaries Payable
I 10
e.
Laundry
Se:z:vices for one
of the
two students
Salaries Expense
10
I
who had paid
d. SalariesExpense
10
Salaries Payable
To record salaries earned
but not paid.
10
in advance had been performed as of 9/30/91.
Unearned
10
f.
Laundry
I
Revenue
Laundty
I
Revenue
10
e. Unearned Laundry Revenue
Laundry Revenue
To record Laundry Fees
earned.
10
f. Accounts Receivable
Laundry Revenue
To record Laundry Fees
earned.
30
10
On Tuesday, September 29, services had been finished
for 3 studentswho promised to pay $10 each on 10/5.
Accounts Receivable
30
I
30
Laun&:y Revenue
18
30
IV.
WORKSHEET
A worksheet begins with a Trial Balance. Adjustments based upon data accumulated during the period are made.
Horizontal extensions, with like balances being added and unlike balances being subtracted, result in an Adjusted
Trial Balance. Each account is then extended to the proper (similar) column of the Income Statement or Balance
Sheet. Income is then added to both the Income Statement and Balance Sheet to prove the Worksheet.
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ICash
IAccounts
Receivable
Adjustments
(f)
30
(a) 10
M..2..Q
1
Prepaid Advertising
Launfuy SttPplies
I Laundry
Equipment
IAccounts Payable
1Unearned Laundry Revenue
Trip.l Balance
117
5
50
2..5.
48
30
20
J.5.Q.
I
Capital. Darin Jones
- Darin Jones
Laundry Revenue
20
1
IWithdrawals
(e)
10
150
(e)
(f)
I
1Washer/Dryer
75
lQ
350
Expense
[TelePhone ~e
I
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350
Laundry Supplies Expense
(a)
(b)
10
20
Depreciation
Expense,
LaundJ:y Equ:i,pment
i.cl
1
IAdvertising
Expense
I
IAccumulated
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35
40
5
48
I
I
30
10
.liLl
20
1
190
1
I
75
.lQ
75
12
10
20
10
20
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II
.1
.....l
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Depreciation,
(c)
Laundry Equipment
(d)
Salaries Expense
ISalaries
I
10
30
1
Balance'
Sheet
I
117
I
Income
Statement
Adjusted
Trial Balance
117
35
40
5
48
30
10
150
20
190
1
1
10
10
-
Payable
1
.Ml l.Q.
Bl__Rl
,
10
--
JQ
391
391
126
I
190
--H 190
I
l
190...
265
JQ I
201 I
265
--H 1
26.5 II
Note: Income represents the net changes in assets and liabilities occurring during the period. Because Revenue
(asset increases) were greater than expenses (asset decreases or liability increases), the debit column of the Balance
Sheet is higher than the credit column by an amount equal to net income. This occurred because equity changes
have been temporarily stored in Income Statement accounts. The Closing Process, explained in the next unit, will
formally increase Owner's Equity by the proper amount.
.
V.
ACCOUNTING STATEMENTS
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'arranged to show how Balance
'Sheet accounts come from the
top of the Trial Balance, and
I
IncomeStatementaccounts
come from the bottomof the
Trial Balance.
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Quick Clean LaundryService
Income Statement
Ended
Sept.
30,
1991
I
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Revenue:
Laundry Revenue
IAccounts Receivable
I Prepaid Advertising
ILaundry Supplies
Laundry Equipment
AccurmJlated Depreciation,
j
Laundry Equipment
IAccounts Payable
ISalaries Payable
Darin Jones
ILaundry Revenue
Advertising
Expense
Salaries Expense
I Washer/Dryer
Expense
ITelephone Expense
ILaundry Supply Expense
Depreciation
Expense,
Laundry Equipment
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Operating
Expenses:
Advertising
Salaries
$10
10
75
10
20
Washer/Dryer
Telephone
Laundry Supplies
Depreciation,
I
Laundry Equipment
Total Operating
Net Income
I
--1.
Expenses
~I
$ 64
I
,
,
[
20
190
I
10
10
75
10
20
~
Current Assets:
Cash
Accounts Receivable
PrepaidAdvertising
Laundry Supplies
Plant and Equipment:
Laundry Equipment
Less AccurmJlated
$117
35
40
5
I
1
1
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-1.
,
---fl
$244
-I
LIABILITIES
Liabilities:
CUrrent
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$48
11
Depreciation
301 Total Assets
10
10
1501
$391
!
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$
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,
,
Unearned Laundry Revenue
Capital, Darin Jones
ASSETS
I
$117
35
40
5
48
IWithdrawals,
$190
I
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I Cash
1
For the Month
j
Quick Clean Laundry Service
Adjusted Trial Balance
September 30, 1991
,
1
Note: SectionV hasbeen
1
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Quick Clean Laundry Service
Balance Sheet
September 30, 1991
I
1
1
I
Accounts
Payable
Salaries
Payable
Unearned
Laundry Revenue
Total CUrrent Liabilities
$ 30
10
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~,
$ 50 ,
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OWNER
I
S EQUITY
I
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$3911
Capital Sept. 1
Net Income
Withdrawals
Capital Sept. 30
Total Liabilities+
Owner
I
s Equity
$150
$64
-2.Q...M
~I
$244
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1
Note: Now that the concept of normal balances has been fIrmly established; that is assets and expenses have debit
balances and revenues, liabilities, equity, and contra assets (accumulated depreciation) have credit balances, it will
no longer be necessary to restrict statement presentations to two columns with debit balances always to the left of
credit balances. The above statements have been so constructed.
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