 As we have learned, accounting is a systematic process of recording the financial transactions of a business and arranging the subsequent data in a usable format.
1
 The above mentioned process is known as the Accounting
Cycle.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

7
8
THE ACCOUNTING CYCLE
6
1
4
3
5
2
1. Analyzes transactions
2. Journalize
3. Post
4. Prepare work sheet
5. Prepare financial statements
6. Journalize adjusting and closing entries
7. Post adjusting and closing entries
8. Prepare post-closing trial balance
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 8-3
2

 So far we have learned how to analyze business transactions, journalize the transactions in the general journal, and post the journal entries to the general ledger.
 Now we will begin to explore the next step of the accounting cycle, which is preparing an Accounting Work Sheet.
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

4
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2

 An Accounting Work Sheet is a columnar accounting form used to summarize the General Ledger information needed to prepare Financial Statements.
5
 The Work Sheet is used for four reasons:
1.
Summarize general ledger account balances to prove debits equal credits
2.
Plan needed changes to the general ledger accounts to bring account balances up to date
3.
Separate general ledger account balances according to the financial statements to be prepared
4.
Calculate the amount of net income or net loss
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2

PREPARING THE HEADING OF A
WORK SHEET
7 page 153
2
1 Name of Company
Name of Report
3 Date of Report
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

1
PREPARING A TRIAL BALANCE ON A
WORK SHEET
2
5
3 page 154
4
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. Add both the Trial Balance
Debit and Credit columns.
5.
Write each column’s total below the single line.
6
6. Rule double lines across both Trial Balance columns.
8
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

ADJUSTING ENTRIES
 We Journalize transactions in the General Journal on a daily basis.
 We Post journal entries to the General Ledger at least monthly or when called for in the Accounting
Cycle .
 We create Work Sheets to summarize and report financial information periodically during the Fiscal
Period .
10
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

11
ADJUSTING ENTRIES
 So why do we need adjusting entries?
 In order to provide accurate financial information, some General Ledger Accounts must be brought up to date.
 Why must these accounts be brought up to date?
 The accounting concept of Matching Revenues with
Expenses .
 Sometimes a business will pay cash for an expense in one period, but the expense is not used until a latter period. Example: Supplies and Insurance
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

ADJUSTING ENTRIES
 However, the accounting concept of Matching
Revenues with Expenses - states that we must record expenses in the period that they are used to produce revenue.
12
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

SUPPLIES ADJUSTMENT ON A
WORK SHEET
3
1
13 page 158
2
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2

PREPAID INSURANCE ADJUSTMENT
ON A WORK SHEET
14 page 159
3
2
1
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2

15
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
3
LESSON 6-2

16
TIME CHECK
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

PREPARING A WORK SHEET
 Please turn to page 160 in your text book.
17
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

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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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2

19
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2

1
20
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2

21
1
2
Net Income 8
496400
10000
15000
10000
102500
120000
(a)
(b)
71500
10000
6
10000
31000
110000
20000
5000
500000
3
20000
5000
500000
62500 4 62500
356500 356500
21300 21300
2800
(b) 10000 10000
2800
7
30000
11000
(a) 71500 5
30000
71500
11000
881500 881500 81500 81500 146600 356500 734900 525000
209900
356500 356500 734900
209900
734900
9
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

23
EXTENDING BALANCE SHEET ACCOUNT
BALANCES ON A WORK SHEET page 162
2
1. Debit balances without adjustments
2. Debit balances with adjustments
3. Credit balances without adjustments
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
1 3
LESSON 6-3

24
EXTENDING INCOME STATEMENT ACCOUNT
BALANCES ON A WORK SHEET page 163
1
2
1. Sales balance
2. Expense balances without adjustments
3. Expense balances with adjustments
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
3
LESSON 6-3

25
RECORDING NET INCOME, AND
TOTALING AND RULING A WORK SHEET page 164
4
1 2
1. Single rule
2. Totals
3. Net income
3
4. Extend net income
5. Single rule
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
6
6. Totals
7. Double rule
7
5
LESSON 6-3

26
CALCULATING AND RECORDING A NET
LOSS ON A WORK SHEET page 165
1
3
4 2
1. Single rule
2. Totals
3. Net loss
4. Extend net loss
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-3

27 page 166
TERMS REVIEW
 balance sheet
 income statement
 net income
 net loss
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-3

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

CORRECTING ACCOUNTING ERRORS ON
THE WORK SHEET
29
 Some errors in accounting records are not discovered until a work sheet is prepared.
 Example errors in posting to the General Ledger.
 The error may not be found until the Trial Balance does not balance.
 Information can also be incorrectly transferred from the General Ledger to the work sheet’s Trial Balance.
 Other errors may include incorrectly recording
Adjusting Entries.
 The Work Sheet is your first check for errors!
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

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CHECKING FOR TYPICAL CALCULATION
ERRORS
 When two column totals are not in balance, subtract the smaller total from the lager total to find the difference.
 Check the difference between the two amounts against the following guidelines:
 The difference is 1, such as $.01, $.10, $1.00, or $10.00 – the error is most likely addition.
 The difference can be divided evenly by 2 – look for the result.
 The difference can be divided evenly by 9 – look for a transposed number.
 The difference is an omitted amount – look for an amount equal to the difference.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1

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CORRECTING AN ERROR IN POSTING TO
THE WRONG ACCOUNT page 168
2 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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-4

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CORRECTING AN INCORRECT AMOUNT page 169
1
2
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-4

33
CORRECTING AN AMOUNT POSTED TO
THE WRONG COLUMN page 169
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-4