Chapter 6.1
Worksheet for a Service Business
WARM UP
In your Textbook, check out page 151
and read the accounting in the Real
World section and answer the two
Critical Thinking Questions that
follow.
Once finished, do the Internet Activity
Exercise on the same page and
follow the instructions given.
These will be turned in at the end of
class.
Objectives for Chapter 6
•Chapter 6 Introduces the 8Column work sheet.
•In order to complete a work
sheet, adjustments must be
made.
Chapter 6 describes two simple
adjustments for a
proprietorship-supplies and
prepaid insurance.
•
Agenda
Monday November 28, 2011
Objectives for Chapter 6.1
•Define Accounting terms related to a
work sheet for a services business
organization organized as a
proprietorship.
•Identify accounting concepts and
practices related to a work sheet for a
service business organized as a
proprietorship.
•Prepare a heading and a trial balance on
a work sheet
Consistent Reporting
Very Important!
Without consistent
reporting, it would be very
difficult to compare results
from year to year.
Question for YOU!
Can you think of any way to
test to see if debit equal credits
after all posting is complete?
-If Debits equal Credits for
each transaction, total debits
should equal total credits. This
leads to a listing of each
account and its balance-a trial
balance.
Terminology
fiscal period-the length of time for
which a business summarizes and
reports financial information. (p.
152)
work sheet-a columnar accounting
form used to summarize the
general ledger information
needed to prepare financial
statements. (p. 153)
trial balance-a proof of the equality
of debits and credits in a general
ledger. (p. 154)
Explanation
Reporting
accounting
information for a
fiscal period is
very
important…Why
????????
A fiscal period can
begin on any
date. However,
most businesses
begin their fiscal
periods on the
first day of a
month.
LESSON 6-1
Creating a Worksheet
PREPARING THE HEADING OF
page 153
A WORK SHEET
1
2
Name of Company
Name of Report
3
Date of Report
A WORK SHEET IS A PLANNING
DOCUMENT
PREPARING THE HEADING OF
page 153
A WORK SHEET
ALL FINANCIAL STATEMENT HEADINGS
ANSWER THE QUESTIONS: WHO?
WHAT? AND WHEN?
A WORK SHEET IS A PLANNING
DOCUMENT
12
PREPARING A TRIAL BALANCE
ON A WORK SHEET
•ALL ACCOUNTS ARE LISTED IN CHART OF
ACCOUNTS ORDER ON A WORK SHEET
WHETHER THEY HAVE A BALANCE OR NOT.
•ACCOUNT TITLES ARE WRITTEN IN FULL
UNLESS THERE IS NOT ENOUGH ROOM. IF
THERE IS NOT ENOUGH ROOM,
ABBREVIATIONS CAN BE USED
•ACCURACY IS IMPORTANT WHEN COPYING
ACCOUNT BALANCES TO THE WORK SHEET
COLUMNS
PREPARING A TRIAL BALANCE
ON A WORK SHEET
page 154
2
1
3
5
14
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
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.
6
TERMS REVIEW
fiscal period-the length of timepage
for
155
which a business summarizes
and reports financial
information. (p. 152)
work sheet-a columnar accounting
form used to summarize the
general ledger information
needed to prepare financial
statements. (p. 153)
trial balance-a proof of the
equality of debits and credits in
a general ledger. (p. 154)
15
APLIA 6.1
 Work Together and On Your
Own
 Application Problem
 Character Counts Page 153
EXIT TICKET
WHAT IS WRITTEN ON THE THREE-LINE HEADING ON
A WORK SHEET?
WHAT GENERAL LEDGER ACCOUNTS ARE LISTED IN
THE TRIAL BALANCE COLUMNS ON A WORK SHEET?
LESSON 6-2
Planning Adjusting Entries on a
Work Sheet
Objectives
•Define Accounting terms related to a
work sheet for a services business
organization organized as a
proprietorship.
•Identify accounting concepts and
practices related to a work sheet for a
service business organized as a
proprietorship.
• Plan Adjustments for supplies and
prepaid insurance.
Question for YOU!
How have we accounted for supplies up
to this point?
Answer: We have increased the asset
account, Supplies, when we purchase
supplies.
We have NOT recorded the use of
supplies. Today we will stress that if
this continues, the balance in the
supplies account will get larger and
larger, even though supplies are
being used each period.
New VOCAB TERM
ADJUSTMENTS: changes recorded
on a work sheet to update
general ledger accounts at the
end of a fiscal period. (p. 157)
Today’s lesson will discuss how to
analyze adjustments for supplies
and prepaid insurance.
Don’t look too excited!
Lesson 6.2
The concept Matching Expenses with
Revenue means that amounts that
helped earn revenue for a period
must be reported as expenses in the
same period.
Again, Today we are going to look how
adjustments are made for supplies
and insurance.
These adjustments will be planned on
the work sheet.
Example (Supplies)
A Company starts the accounting
with
two boxes of
If the period
company uses
four
boxes
of envelopes, the
envelopes
matching concept requires
that the cost of the four boxes
to be included with expenses
for the period. The cost of the
one remaining box must be
listed as an asset, Supplies.
Three additional boxes are
purchased during the period.
Good Habits
You should establish the habit of asking the
four questions to analyze each adjustment.
1.What is the balance of Supplies?
2.What should the balance be for this
account?
3.What must be done to connect the
account balance?
4.What adjustment is made?
Good Habits
The amount of the adjustment is the
amount of supplies used.
This amount will also be the balance of
Supplies Expense after the adjusting
entry.
After the adjusting entry, the balance
in the asset account, Supplies, is the
cost of the supplies still on hand.
There are Three Steps for a Supplies
Adjustment on a work sheet
SUPPLIES ADJUSTMENT ON A
WORK SHEET
page 158
2
3
1
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.
26
SUPPLIES ADJUSTMENT ON A
WORK SHEET
Supplies Account Balance – Supplies on Hand= Supplies Used
$1025.00 -
$310.00 =
$715.00
PREPAID INSURANCE
ADJUSTMENT
ON A WORK SHEET
page 159
2
3
1
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.
28
PREPAID INSURANCE
ADJUSTMENT
ON A WORK SHEET
Prepaid Insurance Balance – Insurance Coverage Remaining
(Unused) = Insurance Coverage Used
$1200.00 -
$1100.00 =
$100.00
PROVING THE ADJUSTMENTS
COLUMNS OF A WORK SHEET
•Reminder: If Debits equal Credits
for each adjustment, the total debits
and total credits in the Adjustments
columns must also equal.
•There are three steps for proving
the Adjustments columns of a work
sheet….
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.
31
3
PREPARING A WORK SHEET
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.
32
page
160 C
33
1
34
1
2
496400
10000
15000
10000
102500
120000
(a)
(b)
6
71500
10000
20000
5000
500000
62500
4
356500
356500
21300
(b)
10000
(a)
71500
2800
30000
11000
881500 881500
8
81500
21300
10000
7
2800
30000
71500
5
11000
81500 146600 356500 734900 525000
209900
209900
356500 356500 734900 734900
9
35
20000
5000
500000
3
62500
Net Income
10000
31000
110000
TERM REVIEW
Adjustments- changes recorded on a work sheet to
page 161
update general ledger accounts at the end of a fiscal
period. (p. 157)
36
Global Perspective
Check out page 160 and answer
the two critical thinking
questions listed.
You may use the internet to
research your answers.
EXIT TICKET
Write a short paragraph on why
adjustments are necessary.
When done, share your answer
with another student and turn it
in.
LESSON 6-3
Extending Financial Statement
Information
on a Work Sheet
Objectives
•Define Accounting terms related to a
work sheet for a services business
organization organized as a
proprietorship.
•Identify accounting concepts and
practices related to a work sheet for a
service business organized as a
proprietorship.
•Complete a Work Sheet for a service
business organized as a proprietorship
What kinds of accounts will be moved to the Balance
Sheet columns and what kinds of accounts will be
moved to the Income Statement Columns
41
New Terminology
Balance sheet: a financial statement that
reports assets, liabilities, and owner’s
equity on a specific date
Income Statement: a financial statement
showing the revenue and expenses for a
fiscal period
Net Income: the difference between total
revenue and total expenses when total
revenue is greater
Net Loss: the difference between total
revenue and total expenses when total
expenses are greater
Here we go!
When extending balances, assets,
liabilities and owner’s equity, they
always go in the Balance Sheet
Reminder!!!
The work sheet will be used to
prepare the balance sheet.
All accounts extended to the Balance
Sheet columns are at the top of the
work sheet, from Cash through the
owner’s drawing account.
EXTENDING BALANCE SHEET
ACCOUNT BALANCES ON A
page 162
WORK SHEET
2
1. Debit balances without adjustments
2. Debit balances with adjustments
3. Credit balances without adjustments
44
1
3
EXTENDING BALANCE SHEET
ACCOUNT BALANCES ON A
WORK SHEET
FYI…A work sheet is prepared in
manual accounting to adjust the
accounts and sort amounts needed to
prepare financial statements.
However, in automated accounting,
adjustments are prepared from the
trial balance, and the software
automatically generates the financial
statements with no need for a work
sheet.
Extending Income Statement
Account Balances
When extending balances, revenue and expenses
always go in the Income Statement columns.
REMINDER:
A worksheet will be used to prepare the income
statement.
There are three steps for extending income statement
account balances on a work sheet.
All accounts that are extended to the income statement
columns are at the bottom of the work sheet, from
Sales through the last Expense account.
EXTENDING INCOME STATEMENT
ACCOUNT BALANCES ON A WORK SHEET
page 163
1
2
3
1. Sales balance
2. Expense balances without adjustments
3. Expense balances with adjustments
47
RECORDING NET INCOME, AND
TOTALING AND RULING A
WORK SHEET
Remember Net Income?
Net Income: the difference between total revenue
and total expenses when total revenue is greater.
There are SEVEN (7) Steps for calculating and recording
net income on a work sheet and totaling and ruling a
work sheet.
RECORDING NET INCOME, AND
TOTALING AND RULING A WORK
page 164
SHEET
4
1. Single rule
2. Totals
3. Net income
49
3
4. Extend net income
5. Single rule
6
6. Totals
7. Double rule
1
7
2
5
CALCULATING AND
RECORDING A NET LOSS ON A
WORK SHEET
Remember Net Loss?
Net Loss: the difference between
total revenue and total expenses
when total expenses are greater
There are FOUR (4) Steps for
calculating and recording new loss on
a work sheet.
CALCULATING AND
RECORDING A NET LOSS ON A
page 165
WORK SHEET
1
3
1.
2.
3.
4.
51
Single rule
Totals
Net loss
Extend net loss
4
2
TERMS REVIEW
• balance sheet
• income statement
• net income
• net loss
52
page 166
Explore Accounting!
Check out Page 171 and make a
written recommendation to the
owner of the company regarding
what kind of Fiscal Year should
be used.
Exit Ticket
• Which Accounts are extended into the
Balance Sheet columns of the work sheet?
• Which Accounts are extended into the
Income Statement columns of the work
sheet?
• In which Balance Sheet column do you
record net income on the work sheet?
• In which Balance Sheet column do you
record net loss on the work sheet?
EXIT TICKET Answers
•
Which Accounts are extended into the Balance Sheet
columns of the work sheet?
• Asset, Liability and Owner’s Equity accounts
•
Which Accounts are extended into the Income
Statement columns of the work sheet?
• Revenue and Expense accounts
•
In which Balance Sheet column do you record net
income on the work sheet?
• Balance Sheet Credit Column
•
In which Balance Sheet column do you record net
loss on the work sheet?
• Balance Sheet Debit Column.
LESSON 6-4
Finding and Correcting Errors on the Work
Sheet
Objectives
•Identify selected procedures
for finding and correcting
errors in accounting records.
What If ? ? ?
What might happen if the columns of a
work sheet do not equal?
Would you leave it and go on, or find
the error before going on?
Answer: Common errors may be
discovered while preparing a
worksheet.
Preview
•In this lesson, specific
procedures will be discussed
that will help find errors in
the accounting records.
Here we go!
• If errors are found while preparing the
work sheet, the errors must be corrected as
shown in this lesson.
• It is very important to work accurately and
prevent errors whenever possible.
• This lesson is designed to provide you with
some quick and effective ways of finding,
correcting, and preventing errors when
preparing a work sheet.
• Many of the suggestions provided today can
be applied while performing other types of
accounting and non accounting
calculations.
Checking for Typical
Calculation Errors
•When two column totals are
not in balance; subtract the
smaller total from the larger
total to find the difference.
Check the difference
between the two amounts
against the following four
guides.
Checking for Typical
Calculation Errors
There are four methods of finding errors
described on page 167.
1.The difference is 1
2.The difference can be divided
evenly by 2
3.The difference can be divided
evenly by 9
4.The difference is an omitted
account.
The Difference Is 1
• For example, if the totals of the
two columns are debit $14,657
and Credit $14658, the
difference between the two
columns is $1.00. The error is
most likely in addition.
• Add the columns again.
The Difference Can Be Divided
Evenly By 2
• For example, the difference between two
column totals is $48, which can be divided
by 2 with no remainder. Look for $24
amount in the Trial Balance columns of the
work sheet. If the amount is found, check
to make sure it has been recorded in the
correct Debit or Credit column.
The Difference Can Be Divided
Evenly By 2
• A $24 debit amount recorded in a credit
column results in a difference between
column totals of $48.
• If the error is not found on the work sheet,
check the general ledger accounts and
journal entries. An entry for $24 may have
been recorded in an incorrect column in the
journal or in an account.
The Difference Can Be Divided
Evenly by 9
• For example, the difference between two
columns is $45. which can be divided by 9
with no remainder. When the difference
can be divided equally by 9, look for
transposed numbers such as 54 or 19
written as 91.
• Also, check for a “Slide”. A “Slide” occurs
when numbers are moved to the right or
left in an amount column. For example, $12
is recorded as $120 or $350 is recorded as
$35.
The Difference Is An Omitted
Account.
Look for an amount equal to the difference. If the
difference is $50, look for an account balance of $50
that has not been extended.
Look for any $50 amount on the work sheet and
determine if it has been handled correctly.
Look in the accounts and journals for a $50 amount and
check if that amount has been handled correctly.
Failure to record a $50 account balance will make a
work sheet’s column totals differ by $50.
Checking For Errors in the Work
Sheet.
1.Check for Errors in the Trial
Balance Column
2.Check for Errors in the
Adjustment Columns
3.Check for Errors in the Income
Statement and Balance Sheet
Columns.
Check for Errors in the Trial
Balance Column
1.Have all general ledger
account balances been copied
in the trial balance column
correctly?
2.Have all general ledger
account balances been recorded
in the correct Trial Balance
Columns?
Check for Errors in the
Adjustment Columns
Do the Debits equal the Credits for
each adjustment?
Use the small letters that label each
part of an adjustment to help check
accuracy and equality of debits and
credits.
Is the amount for each adjustment
correct?
Check for Errors in the Income
Statement and Balance Sheet
Columns.
 Has each amount been copied correctly when
extended to the Income Statement or Balance Sheet
column?
 Has each account balance been extended to the
correct Income Statement or Balance Sheet
columns?
 Has the net income or net loss been recorded in the
correct Income Statement or Balance Sheet
columns?
 Has the net income or net loss been recorded in the
correct Income Statement or Balance Sheet
Columns.
POSTING TO THE WRONG
ACCOUNT
2
page 168
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.
72
CORRECTING AN INCORRECT
AMOUNT
page 169
2
1
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.
3 Steps for correcting an incorrect amount in
the account.
73
CORRECTING AN AMOUNT
POSTED TO THE WRONG
COLUMN
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.
74
page 169
Check Your Understanding
• What is the first step in checking for
arithmetic errors when two column
totals are not in balance?
• What is the one way to check for an
error caused by transposed numbers?
• What term is used to describe an
error that occurs when numbers are
moved to the right or left in an
Amount Column.
Check Your Understanding
• What is the first step in checking for
arithmetic errors when two column
totals are not in balance?
• Subtract the smaller total from the
larger total to find the difference.
Check for Understanding.
What is the one way to check for
an error caused by transposed
numbers?
Answer- The difference between
the two column totals can be
divided evenly by 9.
Check for Understanding
•What term is used to
describe an error that occurs
when numbers are moved to
the right or left in an Amount
Column.
Answer: A slide
Aplia
• Work Together 6-4
•On Your own 6-4
•Application 6-4
•Chapter 6 Study Guide
•Century21accounting.com
Tutorial Test for
Chapter 6
Exit Ticket
•