Unit 5 * Revenue and Expense Accounts

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Unit 12 – Worksheet, Adjustments, Financial
Statements
Eight-Column Worksheet
• -how adjustments are first prepared on the
worksheet (same way as 6 – column) …just
need to add 2 columns for adjustments.
• In the following order:
– Trial Balance
– Adjustments
– Income Statement
– Balance sheet
Eight-Column Work Sheet
• SEE FIGURE 6.5
(Page 221)
Adjustment #1 (Supplies)
• A count made of all supplies on hand shows
$900 worth left on January 31.
Total supplies purchased
Less: Supplies left
Supplies used
$1000
900
$100
Supplies
Jan.31
Balance
1000 Jan. 31
900
Supplies Expense
100
Jan. 31
• See Figure 6.6 – Page 223
100
Adjustment #2 (Prepaid Insurance)
• In January, a $720, one year insurance policy was
purchased. One month of the policy is now
expired.
Insurance for 1 year
Per month (1/12 * 720)
$720
$60
Prepaid Insurance
Jan.31
Balance
720 Jan. 31
660
Insurance Expense
60
• See Figure 6.7 – Page 225
Jan. 31
60
Adjustment #3 (Prepaid rent)
• On January 1st, rent of $5100 was prepaid for
January, February, & March.
Rent for 3 months
Per month (1/3 * 5100)
$5100
$1700
Prepaid Rent
Jan.31
Balance
5 100 Jan. 31
3 400 700
Rent Expense
1
Jan. 31
700
• See Figure 6.8 – Page 226
1
Adjustment #4 (Depreciation-Equipment)
• 20% per year (Declining Balance method – tax
purposes)
This year’s depreciation
Per month (1/12 * 1920)
Equipment
Jan. 31 12 000
$1920
$160
Accumulated DepreciationEquipment
Jan. 31 2400
31 160
Balance 2560
• See Figure 6.9 – Page 227
Depreciation ExpenseEquipment
Jan. 31
160
Completing the Worksheet
• See Page 227.
– Add or subtract the adjustment to create your
new total for the account. (balance sheet or
income statement)
• Net income/loss calculated the same way as
before. (Debits > Credits = net loss and vice
versa)
- Double underline totals!
8-Column Worksheet (Steps)
1.
2.
3.
4.
5.
Heading
Trial Balance
Data for adjustments (collect)
Adjustments column (total, balance, rule)
Transfer to income statement or balance
sheet
6. Determine Net income/loss
7. Balance & rule the work sheet.
10 – Column Worksheet
• Two extra columns added (Adjusted Trial
Balance)
– Purpose: to ensure ledger accounts still in balance
• See Figure 6.10 (Page 230)
10-Column Worksheet (Steps)
1.
2.
3.
4.
5.
Heading
Trial Balance
Data for adjustments (collect)
Adjustments column (total, balance, rule)
Transfer to adjusted trial balance. (recalculate
balances where necessary)
6. Transfer to income statement or balance sheet
7. Determine Net income/loss
8. Balance & rule the work sheet.
Preparing the Financial Statements
• Financial statements are prepared from the
work sheet. (Page 231-232)
• New Expenses (from adjustments) are
included in the income statement.
• Accumulated Depreciation is shown as a
subtraction from Equipment in the fixed asset
section of the balance sheet.
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