Chapter 6 How do you create a Worksheet & Plan Adjusting ... · How do you create a Worksheet &...
Transcript of Chapter 6 How do you create a Worksheet & Plan Adjusting ... · How do you create a Worksheet &...
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Chapter 6
How do you create a Worksheet & Plan Adjusting Entries on a Work Sheet?
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Fiscal Period
Consistent Reporting The same accounting procedures must be followed in the same way
each accounting period in order to make information comparablebetween fiscal periods
Fiscal period Length of time for which a business summarizes and reports
financial information (also known as accounting period) Businesses can choose any length of time it wishes – most choose a
year (TechKnow chose 1 month because it’s a new business) Can begin on any date – most choose first day of month Businesses usually choose a one-year fiscal period to end during a
time when they are least busy Financial information can be analyzed, summarized, and reported at
any time, but it must be done at the end of a fiscal period
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LESSON 6-1
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LESSON 6-2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Worksheet
Worksheet – a columnar accounting form used to summarize the general ledger information needed to prepare financialstatements
Accountants use worksheets for four reasons:1. To prove that debits = credits in the general ledger (trial balance)2. To plan needed changes to GL accounts to bring balances up to
date3. To separate GL account balances according to the financial
statements to be prepared4. To calculate the amount of net income or net loss for a fiscal period
Planning tool not permanent record – pencil is used
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LESSON 6-1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
PREPARING THE HEADING OF A WORK SHEET
Trial Balance – proof of the equality of debits and credits in a general ledger Information for the TB is taken from the general ledger GL accounts are listed on a trial balance in the same order as they
are listed on the chart of accounts All accounts are listed – even if they do not have a balance
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LESSON 6-1
page 153
Name of Company1Name of Report2
Date of Report3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-1
1. Write the general ledger account titles.
2. Write the general ledger debit account balances. Write the general ledger credit account balances.
4. Add both the Trial Balance Debit and Credit columns.
3. Rule a single line across the two Trial Balance columns.
5. Write each column’s total below the single line.
6. Rule double lines across both Trial Balance columns.
PREPARING A TRIAL BALANCE ON A WORK SHEET page 154
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Planning Adjustments on a Work Sheet
Accounting Concept: matching revenue with expenses Expenses associated with revenue earned must be recorded in the
same accounting period EXAMPLE: supplies and prepaid insurance…must be brought up to date
at end of fiscal period (unrealistic to record what is used on daily basis, but they were used to earn revenue during fiscal period)
Adjustments Changes recorded on a work sheet to update general ledger
accounts at the end of a fiscal period Adjustments are not recorded in journal and posted until the accuracy
is proved on the work sheet
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LESSON 6-1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
SUPPLIES ADJUSTMENT ON A WORK SHEET
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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
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LESSON 6-2
PREPAID INSURANCE ADJUSTMENT ON A WORK SHEET page 159
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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
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LESSON 6-2
PROVING THE ADJUSTMENTS COLUMNS OF A WORK SHEET page 160
3. Rule double lines.
2. Add both the Adjustments Debit and Credit columns. Write each column’s total.
1. Rule a single line.
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Financial Statements
Balance Sheet Financial statement that reports assets, liabilities, and owner’s
equity ON A SPECIFIC DATE Accounting equation (A = L + OE) These account balances in the Trial Balance columns are extended
to balance sheet section of work sheet Income statement
Financial statement showing the revenue and expenses for a fiscal period
Revenue & expense account balances in the Trial Balance columns are extended to income statement section of the work sheet
Net Income Difference between total revenue and total expenses when total
revenue is greater
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LESSON 6-1
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LESSON 6-2
(b) 10000
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(b) 10000(a) 71500
(a) 71500
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11000
10000102500120000
200005000
50000062500
35650021300
280030000
881500 881500 81500 81500 146600 356500 734900 525000
356500 734900
1000031000
11000020000
5000500000
62500
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11000
21300
280030000
356500
10000
71500
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209900 209900Net Income 89
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356500 734900
4964001000015000
49640010000
1500
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LESSON 6-3
CALCULATING AND RECORDING A NET LOSS ON A WORK SHEET page 165
2. Totals3. Net loss4. Extend net loss
1. Single rule 2
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Net loss – difference between total revenue and total expenses when total expenses are greater
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LESSON 6-2
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.
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LESSON 6-2
TERM REVIEW
fiscal period work sheet trial balance adjustments
page 161
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-4
How do you find and correct errors on the Work Sheet?
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Checking for Typical Calculation Errors
When the two columns are not in balance, here are some quick checks: The difference is 1, such as .01, .10, 1, or 10. The error is most
likely in addition. Add the columns again. The difference can be divided evenly by 2. Look for the amount
divided by 2 and check to make sure it has been recorded in the correct column.
The difference can be divided evenly by 9. Look for transposed numbers or a “slide”. A slide occurs when numbers are moved to the right or left in an amount column.
The difference is an omitted amount. Look for an amount equal to the difference.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-4
CORRECTING AN ERROR IN POSTING TO THE WRONG ACCOUNT page 168
1. Draw a line through the entire incorrect entry. Recalculate the account balance and correct the work sheet.
2 Correct entry
1 Incorrect entry
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
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LESSON 6-4
CORRECTING AN INCORRECT AMOUNT
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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.
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LESSON 6-4
CORRECTING AN AMOUNT POSTED TO THE WRONG COLUMN
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6. Recalculate the account balance, and correct the work sheet.5. Record the posting in the correct amount column.4. Draw a line through the incorrect item in the account.
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