CHAPTER 6 CHAPTER 6

WORK SHEET FOR A SERVICE BUSINESS

2

6-1 CREATING A WORK SHEET6-1 CREATING A WORK SHEET

Fiscal Period: The length of time for which a business summarizes and reports financial information.

1 Month, 6 Months, 1 YearBusiness can choose length which suit their needs. Period can be any date, though most businesses begin on the first day of the month.

Work Sheet: A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.

3

PREPARING THE HEADING OF A WORK SHEETPREPARING THE HEADING OF A WORK SHEETpage 153

Name of CompanyName of Company

11

Name of ReportName of Report

22

Date of ReportDate of Report

33

Trial Balance: A proof of the equality of debits and credits in the general ledger. -Account titles listed in the same order as chart of accounts.-All accounts are listed even if they do not have a balance.

4

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 SHEETPREPARING A TRIAL BALANCE ON A WORK SHEETpage 154

11

22

44

33

55 66

6-2 PLANNING ADJUSTING ENTRIES 6-2 PLANNING ADJUSTING ENTRIES ON A WORK SHEETON A WORK SHEET

Adjustments: Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period.-Assets like supplies and prepaid insurance are used to earn revenue.-What we have actually used to earn revenue become expenses.-We use the work sheet to plan adjustments

4 Questions we ask when analyzing adjustments:1. What is the balance?2. What should the balance be?3. What must be done to correct the account balance?4. What adjustment is made?

Look at pages 158-159

6

SUPPLIES ADJUSTMENT ON A WORK SHEETSUPPLIES ADJUSTMENT ON A WORK SHEET

11

22

page 158

33

1. Write the debit amount.

2. Write the credit amount.

3. Label the two parts of this adjustment.

7

PREPAID INSURANCE ADJUSTMENT PREPAID INSURANCE ADJUSTMENT ON A WORK SHEETON A WORK SHEET page 159

11

2233

1. Write the debit amount.

2. Write the credit amount.

3. Label the two parts of this adjustment.

8

PROVING THE ADJUSTMENTS PROVING THE ADJUSTMENTS COLUMNS OF A WORK SHEETCOLUMNS 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.

11

33

22

9

PREPARING A WORK SHEETPREPARING A WORK SHEETpage 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.

10

(b) 10000

44

(b) 10000

(a) 71500

(a) 71500

33

4964001000015000

11000

10000102500120000

200005000

50000062500

35650021300

280030000

881500 881500 81500 81500 146600 356500 734900 525000

356500 734900

49640010000150001000031000

11000020000

5000500000

62500

66

11000

21300

280030000

356500

10000

71500

77

209900 209900Net Income 8899

11

22

55

356500 734900

11

6-3 EXTENDING BALANCE SHEET ACCOUNT 6-3 EXTENDING BALANCE SHEET ACCOUNT BALANCES ON A WORK SHEETBALANCES ON A WORK SHEET page 162

1. Debit balances without adjustments

2. Debit balances with adjustments 3. Credit balances without adjustments33

22

11

At the end of each fiscal period, TechKnow prepares two financial statements from information on the worksheet.Balance Sheet: Reports assets, liabilities, and owner’s equity on a SPECIFIC Date.

12

EXTENDING INCOME STATEMENT ACCOUNT EXTENDING INCOME STATEMENT ACCOUNT BALANCES ON A WORK SHEETBALANCES ON A WORK SHEET

page 163

1. Sales balance2. Expense balances without adjustments3. Expense balances with adjustments

11

33

22

Income Statement: A financial statement showing revenue and expenses for fiscal period called an income statement.

13

1. Single rule

2. Totals

3. Net income

RECORDING NET INCOME, AND TOTALING RECORDING NET INCOME, AND TOTALING AND RULING A WORK SHEETAND RULING A WORK SHEET

4. Extend net income 6. Totals

66 773355

221144

5. Single rule 7. Double rule

page 164

Revenue > Expenses = Net Income

14

CALCULATING AND RECORDING A NET CALCULATING AND RECORDING A NET LOSS ON A WORK SHEETLOSS ON A WORK SHEET page 165

2. Totals

3. Net loss

4. Extend net loss

1. Single rule 22

11

33

44

Expenses > Revenue = Net Loss