Steps to Preparing a Worksheet
Chapter 5 Outline
Chapter Objectives: 1. Prepare a work sheet. 2. Explain the process of closing the books. 3. Describe the content and purpose of a post-closing trial balance. 4. State the required steps in the accounting cycle. 5. Explain the approaches to preparing correcting entries. 6. Identify the sections of a classified balance sheet.
Worksheet- a multiple-column form that may be used in the adjustment process and in preparing financial statements. *It is not a permanent accounting record; it is neither a journal or a part of the general ledger. It is merely a device used to make it easier to prepare adjusting entries and the financial statements.
Study Objective 1: Steps in Preparing a Work Sheet
Step 1. Prepare a Trial Balance on the Work Sheet
Step 2. Enter the Adjustments in the Adjustments Columns Note: Adjustments are not journalized until after the work sheet is completed and the financial statements have been prepared.
Step 3. Enter Adjusted Balances in the Adjusted Trial Balance Columns The adjusted balance of an account is obtained by combining the amounts entered in the first four columns of the work sheet for each account. *For each account on the work sheet, the amount in the adjusted trial balance columns is the account balance that will appear in the ledger after the adjusting entries have been journalized and posted.
Step 4. Extend Adjusted Trial Balance Amounts to Appropriate Financial Statement Columns *Extend adjusted trail balance amounts to the income statement and balance sheet colums of the work sheet. Hint: Every adjusted trial balance amount must be extended to one of the four statement columns. Debit amounts go to debit columns and credit amounts go to credit columns.
Step 5. Total the Statement Columns, Compute the Net Income
Chapter Objectives: 1. Prepare a work sheet. 2. Explain the process of closing the books. 3. Describe the content and purpose of a post-closing trial balance. 4. State the required steps in the accounting cycle. 5. Explain the approaches to preparing correcting entries. 6. Identify the sections of a classified balance sheet.
Worksheet- a multiple-column form that may be used in the adjustment process and in preparing financial statements. *It is not a permanent accounting record; it is neither a journal or a part of the general ledger. It is merely a device used to make it easier to prepare adjusting entries and the financial statements.
Study Objective 1: Steps in Preparing a Work Sheet
Step 1. Prepare a Trial Balance on the Work Sheet
Step 2. Enter the Adjustments in the Adjustments Columns Note: Adjustments are not journalized until after the work sheet is completed and the financial statements have been prepared.
Step 3. Enter Adjusted Balances in the Adjusted Trial Balance Columns The adjusted balance of an account is obtained by combining the amounts entered in the first four columns of the work sheet for each account. *For each account on the work sheet, the amount in the adjusted trial balance columns is the account balance that will appear in the ledger after the adjusting entries have been journalized and posted.
Step 4. Extend Adjusted Trial Balance Amounts to Appropriate Financial Statement Columns *Extend adjusted trail balance amounts to the income statement and balance sheet colums of the work sheet. Hint: Every adjusted trial balance amount must be extended to one of the four statement columns. Debit amounts go to debit columns and credit amounts go to credit columns.
Step 5. Total the Statement Columns, Compute the Net Income