LESSON 13-1
Work Sheet for a Corporation
CENTURY 21 ACCOUNTING © Thomson/South-Western
Corporation Financial Statements
 Corporations prepare 3 important financial
statements at the end of each fiscal period:



Income statement
Statement of stockholders’ equity
Balance Sheet
 The first step to preparing the financial
statements is to prepare a worksheet.
CENTURY 21 ACCOUNTING © Thomson/South-Western
Corporation Worksheet
 Corporations prepare 3 important
financial statements at the end of
each fiscal period:



Income statement
Statement of stockholders’ equity
Balance Sheet
CENTURY 21 ACCOUNTING © Thomson/South-Western
4
Work sheet
 A columnar accounting form used to summarize
the general ledger information needed to prepare
financial statements is called a work sheet.
 Accountants use a work sheet for 4 reasons:
 To summarize general ledger account balances to prove
that debits equal credits
 To plan needed changes to general ledger accounts to
bring account balances up to date
 To separate general ledger account balances according
to the financial statements to be prepared
 To calculate the amount of net income or net loss for a
fiscal period
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 6-1
5
Preparing a Trial Balance Worksheet
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. Rule double lines across
both Trial Balance columns.
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1
6
Planning Adjusting Entries on a Work
Sheet
 In order to give accurate information on financial
statement, some general ledger accounts must
be brought up to date at the end of a fiscal
period.
 Adjustments are made in the adjustments
column of the worksheet.
 Examples of accounts that might need to be
adjusted at the end of a fiscal period:
 Prepaid Insurance
 Supplies
 Depreciation
 Organization Expense
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 6-2
7
ORGANIZATION EXPENSE
ADJUSTMENT
page 371
• Corporate organization costs are intangible assets
• A common accounting practice is to write off intangible
assets over a period of years (patents, copyrights,
organizational costs)
• Recognizing a portion of an expense in each of several
years is called amortization
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1
8
ORGANIZATION EXPENSE
ADJUSTMENT
page 371
2
1
1. Increase the expense.
2. Decrease the asset.
• Lamplight incurred total organization costs of $2,400. LampLight
spreads the costs over 5 years. Thus 1/5 of this amount, $480, is
amortized in each of the first 5 years
•
Organization Expense is debited for $480. Organization Costs is credited for
$480.
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1
9
FEDERAL INCOME TAX
EXPENSE ADJUSTMENT
page 371
2
1
1. Increase the expense.
2. Increase the liability.
 At the beginning of the year, Lamplight estimated its federal income
tax for the year to be $32,000.
 LampLight paid the estimated tax to the federal government in four
equal quarterly installments if $8,000 each
 As of December 31, LampLight calculated its actual federal income tax
to determine whether is owes additional income tax.
 An adjustment Is planned on the worksheet for the additional amount
owed.
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1
10
CALCULATING FEDERAL
INCOME TAX EXPENSE
page 372
Calculating Net Income before Federal Income Tax
Income Statement
Credit Column Total
–
$883,782.75
–
Income Statement
Debit Column Total
before Federal
Income Tax
$752,647.48
=
Net Income before
Federal Income Tax
=
$131,135.27
• Complete the work sheet’s Adjustments columns except for the federal income
tax expense adjustment. Do not total the Adjustments columns at this time
• Extend all amounts, except Federal Income Tax Expense, to the work sheet’s
Income Statement columns
• Determine the worksheet’s Income Statement column totals using a calculator.
Do not record the column totals on the worksheet.
• Calculate the difference between the two totals. The difference is the net
income before federal income tax.
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1
11
CALCULATING FEDERAL
INCOME TAX EXPENSE
page 372
Calculating Federal Income Tax Amount
Net Income
before Taxes

Tax Rate
=
Federal Income
Tax Amount
$ 50,000.00

15%
=
$ 7,500.00
Plus 25,000.00

25%
=
6,250.00
Plus 25,000.00

34%
=
8,500.00
Plus 31,135.27

39%
=
12,142.76
$131,135.27
$ 34,392.76
 Calculate the amount of federal income tax using a tax rate table
furnished by the IRS





15% of net income before
25% of net income before
34% of net income before
39% of net income before
34% of net income before
taxes, zero to $50,000
taxes, $50,000 to $75,000
taxes, $75,000 to $100,000
taxes, $100,000 to $335,000
taxes over $335,000
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1
12
CALCULATING FEDERAL
INCOME TAX EXPENSE
page 372
Calculating Accrued Federal Income Tax Expense
Total Federal
Income Tax
Expense
$34,392.76
–
Estimated Federal
Income Tax
Already Paid
=
Accrued Federal
Income Tax
Expense
–
$32,000.00
=
$2,392.76
 Calculate the amount of accrued federal income tax
expense
 Record the federal income tax expense adjustment on the
worksheet
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1
13
CORPORATE WORK SHEET
CENTURY 21 ACCOUNTING © Thomson/South-Western
page 374
LESSON 13-1
14
CORPORATE WORK SHEET
page 375
 Extend the new
balance of Federal
Income Tax Payable to
the Balance Sheet
Credit column
 Extend the new
balance of Federal
Income Tax Expense to
the Income Statement
debit column
 Total the worksheet’s
adjustments, Income
Statement, & Balance
Sheet columns
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1
15
TERM REVIEW
page 376
 amortization
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 13-1