chapter 8 introduction. what is a work sheet? is an informal business paper used to organize and...
TRANSCRIPT
Chapter 8 Introduction
What is a Work Sheet?
Is an informal business paper used to organize and plan the information for the financial statements
Usually done in PENCIL Done on columnar bookkeeping
paper
Why?
Why use the Work Sheet? Accountants prefer to use the work
sheet, rather than rely solely on the trial balance sheet
Organizes the accounts for a specific time period
Work Sheet
8 columns are used in the work sheet to allow accounts to make any adjustments required by certain GAAPs (look at in chapter 9)
For this chapter we will be introduced to 6 columns
Example of a Work Sheet
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
8,952.00 8,952.00 -
7,500.00 7,500.00 -
2,900.00 2,900.00 -
4,800.00 4,800.00 -
18,650.00 18,650.00 -
18,700.00 18,700.00
1,000.00 1,000.00
22,150.00 22,150.00
39,942.00 39,942.00
34,200.00 34,200.00 -
84,578.00 84,578.00
360.00 360.00
6,500.00 6,500.00
1,350.00 1,350.00
680.00 680.00
11,000.00 11,000.00
2,415.00 2,415.00
29,663.00 29,663.00
147,670.00 147,670.00
51,968.00 84,578.00 95,702.00 63,092.00
32,610.00 - - 32,610.00
84,578.00 84,578.00 95,702.00 95,702.00
Sammer ServicesWork Sheet
Year Ended December 31, 2006
Net Income
Revenue
Bank Charges
Car Expense
Miscellaneous Expense
Telephone Expense
Interest Expense
Rent Expense
Wages Expense
Accounts Payable
Bank Loan
Al Sammer, Capital
Al Sammer, Drawings
ACCOUNTSTRIAL BALANCE
Furniture and Equipment
Automobile
Supplies
Prepaid Insurance
INCOME STATEMENT BALANCE SHEET
Accounts Receivable
Cash
6 Columns
ALL A
CO
UN
TS
Any changes?
No longer have debtors’ names associated with Accounts Receivable
No longer have creditors’ names associated with Accounts Payable
Control Accounts
Accounts Receivable Control Account: the sum of the balances of all individual Accounts Receivable
Accounts Payable Control Account: the sum of the balances of all individual Accounts Payable
More efficient for preparing work sheets and provides a more efficient presentation on the balance sheet (kept in separate records, look at in chapter 11)
Steps in Preparation of a work sheet
1. Write the headings on columnar paper
Vulcan RentalsWork Sheet
Year Ended December 31, 2012
Company Name
Business Form
Period
Vulcan Rentalls Work Sheet Year Ended December 31, 2012
OR May Look Like this:
2. Record the trial balance on the work sheet
Enter ALL accounts with their balances in the first two columns (trial balance)
Trial balance MUST balance before moving on
DR = CR
3. Extend each of the amounts
Extend each of the amounts from the trial balance columns into one of the four columns to the right Income Statement revenue & expenses
(net income, net loss) Balance sheet assets, liabilities, capital
& drawings
**Be sure that each account balance is transferred only once & that no item is missing
Expanding trial balance #s to correct financial statement
4. Balance the Work Sheet
a) Total the four right-hand money columns
4. Balance the Work Sheet
b) Make sure the difference between Income Statement columns is equal to the difference between the Balance sheet columns.
Known as the BALANCING FIGURE
4. Balance the Work Sheet
C) The work sheet MUST balance. If two figures do not agree, then one or more errors have been made
***YOU MAY NOT PROCEED to the preparation of the financial statements until the errors have been found & corrected!!!!
5. The balancing figures
The work sheet tells the amount of the net income or net loss for the accounting period
Net income = Revenue (credit column) > (greater than) Expense (debit column)
Net Loss = Expense > (greater than) Revenue
When there is a profit the balancing figure is placed in the 2 outside columns. When there is a loss, the balancing figure is placed in the 2 inside columns
Rule off the work sheet
By drawing a single line under the net income totals and a DOUBLE line after the final four totals.
USE A RULER!!!
The Accounting CycleStep 1 Transaction Occurs
(source documents)
Step 2 Journal Entry(daily record of transactions)
Step 3 Posting to General Ledger (update all accounts)
Step 4 Trial balance (DR=CR)
Step 5 Worksheet(informal working doc, calc n/i,
n/l)
Step 6 Financial Statements(Income Statement & Balance
sheet)