IN THE WORK SHEET by alicejenny

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									     Chapter 6

Work Sheet for a Service
      Business
                        Unit 3
• Accounting Concept: Consistent Reporting

  – The same accounting procedures are followed in
    the same way in each accounting period

    • Allows comparison of like information
          » apples to apples
Fiscal Period
• The length of time for which a business summarizes
  and reports financial information

    – Usually a fiscal year, since federal and state taxes are based
      on one year
    – Can begin on any day, but usually starts on first of the
      month
    – Many businesses choose to end their fiscal period when
      there is low business activity



•Techno Consulting is using month long fiscal periods
    •Financial information is reported frequently to help make decisions
    •Started August 1st, so fiscal period is Aug 1st through Aug 31st
    Work sheet
• A columnar accounting form used to
  summarize the general ledger information so
  that financial statements can be prepared

Accountants use work sheets to:

•   Summarize general ledger account balances to prove that debits equal
    credits
•   Plan needed changes to general ledger accounts to bring account
    balances up to date
•   Separate general ledger account balances according to the financial
    statements to be prepared
•   Calculate the amount of net income or net loss for a fiscal period
Journals and Ledgers        Work sheets

 – are permanent
  records of a           – are planning tools
  business                 and not a
                           permanent
                           accounting records
 – are completed in
   ink or printed by a
   computer              – are prepared in
                           pencil
             WORK SHEET: HEADING
                                                        Copa's Copies                        Name of Company
     Name of report                                       Work Sheet

                                             For the Month Ended December 31, 20--               Date of report
                                                                                             For fiscal year, would say
                                                                                              “For
                                                                                       TRIAL BALANCE the Year Ended ----”
                             ACCOUNT TITLE
                                                                               DEBIT                 CREDIT

1    Cash                                                                 6,800.00
2    Petty Cash                                                              75.00
3    Accounts Receivable--Burt Strong                                     1,498.00
4    Supplies                                                               238.00
5    Prepaid Insurance                                                      325.00
6    Accounts Payable--Janet Dao                                                                 298.00
7    Jabbo West, Capital                                                                        7,443.00
8    Jabbo West, Drawing                                                  1,700.00
9    Income Summary
10   Sales                                                                                      4,140.00
11   Advertising Expense                                                    456.00
12   Insurance Expense
13   Miscellaneous Expense                                                  189.00
14   Supplies Expense
15   Utilities Expense                                                      600.00
16                                                                       11,881.00             11,881.00
17
WORK SHEET: Preparing a Trial Balance                     TechKnow Consultin                Account Balances
                                                               Work Sheet                   from General Ledgers
                                                   For the Month Ended August 31, 2011
  Account
   Titles                                                                                     TRIAL BALANCE
                                   ACCOUNT TITLE
                                                                                    DEBIT                     CREDIT

      1    Cash                                                                             4964.00
      2    Petty Cash                                                                        100.00
      3    Accounts Receivable—Oakdale School                                                150.00
      4    Accounts Receivable – Campus Internet Café                                        100.00
      5    Supplies                                                                         1025.00

      6    Prepaid Insurance                                                                1200.00
      7    Accts Pay – Supply Depot                                                                                     200.00

      8    Accts Pay – Thomas Supply Co.                                                                                 50.00
      9    Kim Park, Capital                                                                                           5000.00
      10   Kim Park, Drawing                                                                 625.00
      11   Income Summary
      12   Sales                                                                                                       3565.00
      13   Advertising Expense                                                               213.00
      14   Insurance Expense
      15   Miscellaneous Expense                                                              28.00

      16   Rent Expense
                                           Single rule                                       300.00
      17   Supplies Expense
      18   Utilities Expense          Totals                                                 110.00
      19                                                                                    8815.00                    8815.00
      20
                                   Double Rule
                   Practice!
• Work Together 6 -1
  – WP p. 121
  – Txtbk p. 155


• Homework:
  – On Your Own 6-1
  – WP p. 121
  – Txtbk p. 155
  Work Sheet: Planning Adjusting Entries
• Accounting Concept: Matching Expenses with Revenue

• Supplies and Prepaid insurance are used to earn
  revenue
• What you use of the supplies and insurance
  become expenses when they are used to earn
  revenue
• ADJUSTMENTS are made on a work sheet to
  show these expenses at the end of a fiscal period
 Work Sheet: Supplies Adjustment
• On August 31st before adjustments, the balance
  of Supplies is $1025.00; Supplies expense is $0
        – T- Accounts
• On  August 31st,
                 Ms. Park counted her supplies on
  hand and found that the value of supplies still
  unused was $310.00
• The used supplies is calculated

   Supplies Acct Balance   - Supplies On Hand   = Supplies Used
      on August 31st         on August 31st      During August

        $1,025.00             -   $310.00        =    $715.00
  Work Sheet: Supplies Adjustment
 • Ask 4 questions:
    – What is the balance of supplies?
                » $1,025.00
    – What should the balance be for this account?
                » $ 310.00
    – What must be done to correct the account
      balance?
                » Decrease $715.00
    – What adjustment is made?
                » Debit Supplies Expense $715.00
                » Credit Supplies $715.00

Concept: Matching Expenses with Revenue
          Work Sheet: Supplies Adjustment
       • The Adjustment on the Work Sheet:
                            » Supplies - Credit $715
                            » Supplies Expense – Debit $715
                                            TRIAL BALANCE                                  ADJUSTMENTS
        ACCOUNT TITLE           DEBIT                       CREDIT             DEBIT                       CREDIT
                                                             1



2   Supplies            1   0    2      5    00                                                  (a)   7    1       5   00



4   Supplies Expense                                                 (a)   7    1      5    00


    1. Write the debit amount $715, in the work sheet’s Adjustments Debit column
       on the line with the account title Supplies Expense.
    2. Write the credit amount, $715, in the Adjustments Credit column on the
       line with the account title Supplies
    3. Label the two parts of this adjustment with a small letter a in parenthesis to show
       they go together.
Work Sheet: Prepd Insurance Adjustment

• On August 31st before adjustments, the balance of
  Prepaid Insurance is $1200.00; Insurance expense is $0
          – T- Accounts

• On August 31st, Ms. Park checked her insurance records
  and found the value of insurance coverage remaining was
  $1,100.00.
• The value of used insurance coverage is calculated

   Prpd Ins Acct Balance   - Insurance Coverage   = Insurance Coverage
      on August 31st       Remaining, Unused on    Used During August
                                August 31st

         $1200.00             -   $1,100.00           =    $100.00
Work Sheet: Prepd Insurance Adjustment

 • Ask 4 questions:
    – What is the balance of Prepaid Insurance?
                » $1,200.00
    – What should the balance be for this account?
                » $ 1,100.00
    – What must be done to correct the account
      balance?
                » Decrease $100.00
    – What adjustment is made?
                » Debit Insurance Expense $100.00
                » Credit Prepaid Insurance $100.00

Concept: Matching Expenses with Revenue
    Work Sheet: Prepd Insurance Adjustment

       • The Adjustment on the Work Sheet:
                            » Prepaid Insurance - Credit $100
                            » Insurance Expense – Debit $100
                                            TRIAL BALANCE                                  ADJUSTMENTS
        ACCOUNT TITLE           DEBIT                       CREDIT             DEBIT                       CREDIT
                                                             1



2   Prepaid Insurance   1   2    0      0    00                                                  (b)   1    0       0   00



4   Insurance Expense                                                (b)   1    0      0    00


    1. Write the debit amount $100, in the work sheet’s Adjustments Debit column
       on the line with the account title Insurance Expense.
    2. Write the credit amount, $100, in the Adjustments Credit column on the
       line with the account title Prepaid Insurance
    3. Label the two parts of this adjustment with a small letter b in parenthesis to show
       they go together.
                   Practice!

• Work Together 6-2 #1
  – WP p. 121
  – Txtbk p. 161

• HOMEWORK:
  – On Your Own 6-2 #1
  – WP p. 122
  – Txtbk p. 161
The Steps of Preparing a Work Sheet
Part 1
• Txtbk pp. 160 A,B,C

 Write     Record      Record    Record      Prove the
  the        and         the       the        adjust-
Heading   prove the   supplies   prepaid       ment
            Trial      adjust-   insurance   columns
           Balance      ment       adjust-
                                    ment
 Work Sheet: Extending Financial
              Statement Information
At fiscal year end, 2 financial statements are prepared using info from a work sheet

          Balance Sheet                           Income Statement

       A financial statement that                 A financial statement that
     reports assets, liabilities and              shows the revenue and
     owner’s equity on a specific               expenses for a fiscal period.
                 date.


       Up-to-date balance sheet                 Up-to-date income statement
         account balances are                      account balances are
        extended to the Balance                   extended to the Income
        Sheet Debit and Credit                  Statement Debit and Credit
      columns of the work sheet.                columns of the work sheet.
             Work Sheet: Extending Balance Sheet Account Balances
                                                                       TechKnow Consulting                    Extend the up-to-date asset
                                                                            Work Sheet                         balances to the Balance
                                                                For the Month Ended August 31,2011-              Sheet Debit Column
                                             TRIAL BALANCE                ADJUSTMENTS                 INCOME STATEMENT      BALANCE SHEET

                ACCOUNT TITLE               DEBIT      CREDIT          DEBIT             CREDIT       DEBIT      CREDIT    DEBIT      CREDIT

1    Cash                                    4964.00                                                                        4964.00               1

2    Petty Cash                               100.00                                                                         100.00               2

3    Accounts Receivable—Oakdale School       150.00                                                                         150.00               3

4    Accounts Receivable – Campus IntCafé     100.00                                                                         100.00               4

5    Supplies                                1025.00                                  (a) 715.00                             310.00               5

6    Prepaid Insurance                       1200.00                                  (b) 100.00                            1100.00               6

     Accts Pay – Supply Depot                            200.00                                                                          200.00
7
                                                                       Extend the up-to-date liability balances                                   7

8    Accts Pay – Thomas Supply Co.                        50.00         to the Balance Sheet Debit Column                                 50.00   8

9    Kim Park, Capital                                  5000.00                                                                         5000.00   9

10   Kim Park, Drawing                        625.00                                                                         625.00               10

11   Income Summary                                                                                                                               11

12   Sales                                              3565.00                              Extend the up-to-date owners equity                  12

13   Advertising Expense                      213.00                                         balances to the Balance Sheet Debit                  13

14   Insurance Expense                                                (b) 100.00                           Column                                 14

15   Miscellaneous Expense                     28.00                                                                                              15

16   Rent Expense                             300.00                                                  Total Balance                               16

17   Supplies Expense                                                 (a) 715.00                       Sheet Debit
18   Utilities Expense                        110.00                                                   and Credit
17                                           8815.00    8815.00           815.00           815.00       Columns             7349.00     5250.00   17
     Work Sheet: Extending Income Statement Acct Balances
                                                                       TechKnow Consulting

                                                                            Work Sheet

                                                                For the Month Ended August 31,2011-

                                             TRIAL BALANCE                ADJUSTMENTS                 INCOME STATEMENT        BALANCE SHEET

                ACCOUNT TITLE               DEBIT      CREDIT          DEBIT             CREDIT       DEBIT      CREDIT      DEBIT       CREDIT

1    Cash                                    4964.00                                                                           4964.00               1
                                                                                                                              Extend the
2    Petty Cash                               100.00                                                                            100.00               2
                                                                                                                               up-to-date
3    Accounts Receivable—Oakdale School       150.00                                                                            150.00
                                                                                                                                revenue              3

4    Accounts Receivable – Campus IntCafé     100.00                                                                          balances to
                                                                                                                                100.00               4

5    Supplies                                1025.00                        Extend the up-
                                                                                  (a) 715.00                                  the Income
                                                                                                                                310.00               5
                                                                           to-date expense                                     Statement
6    Prepaid Insurance                       1200.00                              (b) 100.00                                   1100.00               6
                                                                            balances to the                                       Credit
7    Accts Pay – Supply Depot                            200.00                                                                             200.00   7
                                                                                                                                 Column
8    Accts Pay – Thomas Supply Co.                        50.00                 Income                                                       50.00   8

9    Kim Park, Capital                                  5000.00
                                                                              Statement                                                    5000.00   9

10   Kim Park, Drawing                        625.00
                                                                             Debit Column                                       625.00               10

11   Income Summary                                                                                                                                  11

12   Sales                                              3565.00                                                    3565.00   Total Balance           12

13   Advertising Expense                      213.00                                                    213.00                Sheet Debit            13

14   Insurance Expense                                                (b) 100.00                        100.00                and Credit             14

15   Miscellaneous Expense                     28.00                                                     28.00                 Columns               15

16   Rent Expense                             300.00                                                    300.00                                       16

    Supplies Statement Debits + Balance Sheet (a) 715.00 =
 IncomeExpense
17                                             Debits                                                   715.00
 Income Statement Credits +110.00
18  Utilities Expense            Balance Sheet Credits                                                  110.00

17                                           8815.00    8815.00           815.00           815.00      1466.00     3565.00     7349.00     5250.00   17
  Work Sheet: Recording Net Income, Totaling and Ruling a Work Sheet

        Net Income: The difference between
          total revenue and total expenses
                    (when total income is more than total expenses)

 Calculate Net Income
     Income Statement Credit column total   – Income Statement Debit column total
 Label Net Income on the next line
 Write the Net Income amount below the Income Statement Debit Column total
 Extend the amount of Net Income to the Balance Sheet Credit column
     The owner’s equity account increases by a credit
 Rule a single line across the four Income Statement and Balance Sheet columns
 Add all amounts to prove Income Statement and Balance Sheet debits and credits
 Double Rule
     Work Sheet: Recording Net Income, Totaling and Ruling a Work Sheet
                                             TRIAL BALANCE           ADJUSTMENTS            INCOME STATEMENT         BALANCE SHEET

                ACCOUNT TITLE               DEBIT      CREDIT      DEBIT       CREDIT       DEBIT       CREDIT      DEBIT       CREDIT

1    Cash                                    4964.00                                                                 4964.00                 1

2    Petty Cash                               100.00                                                                  100.00                 2
                                                                                             Calculate Net
3    Accounts Receivable—Oakdale School       150.00                                           Income:                150.00                 3

4    Accounts Receivable – Campus IntCafé     100.00                                            Income                100.00                 4

5    Supplies                                1025.00                           (a) 715.00     Statement               310.00                 5
                                                                                            Credit amount –
6    Prepaid Insurance                       1200.00                           (b) 100.00                            1100.00                 6
                                                                                                Income
7    Accts Pay – Supply Depot                            200.00                                                                    200.00    7
                                                                                              Statement
8    Accts Pay – Thomas Supply Co.                        50.00                              Debit amount                           50.00    8

9    Kim Park, Capital                                  5000.00                                                                   5000.00    9

10   Kim Park, Drawing                        625.00                                        Write in Income           625.00                 10

11
        Label “Net
     Income Summary
                                                                                              Statement
                                                                                                                                             11
       Income” on                                                                            Debit column                Extend the
12   Sales                                              3565.00                                           3565.00                            12
      the next line                                                                                                      amount to
13   Advertising Expense                      213.00                                          213.00                                         13
                                                                                                                          Balance
14   Insurance Expense                                            (b) 100.00                  100.00                                         14
                                                                                                                        Sheet Credit
15   Miscellaneous Expense                     28.00                                           28.00                                         15

16   Rent Expense                             300.00                                          300.00                                         16

17   Supplies Expense                                             (a) 715.00                  715.00

18   Utilities Expense                        110.00                                          110.00

17                                           8815.00    8815.00      815.00        815.00    1466.00      3565.00    7349.00      5250.00    17

18   Net Income                                                                               2099.00                              2099.00

19                Single rule, total all columns, and double rule to prove                    3565.00     3565.00     7349.00      7349.00

20                                                                                                                                           18
                                     Work Sheet: Recording Net LOSSS


                                                            Calculate Net
                                                                Loss:
                                                               Income
                                                             Statement
                                                            Debit amount
                                                            minus Income
                                                             Statement
                                                            Credit amount

                                                           Write in Income                                Extend the
                                                             Statement                                     amount to
        Label “Net
                                                           Credit column                                    Balance
       Income” on
      the next line                                                                                       Sheet Debit




                                       TRIAL BALANCE         ADJUSTMENTS      INCOME STATEMENT         BALANCE SHEET

             ACCOUNT TITLE            DEBIT     CREDIT     DEBIT     CREDIT   DEBIT       CREDIT      DEBIT       CREDIT

17                                                                             2200.00      1800.00    5100.00      5500.00    17

18   Net Income                                                                              400.00      400.00

19                                                                              2200.00     2200.00     5500.00      5500.00
                  Single rule, total all columns, and double rule to prove
20                                                                                                                             18
Work on now and for homework
• OYO 6-3
  – WP p. 122, Txtbk p. 166


• Application Problem 6-1, 6-2, 6-3
  – WP p. 133, Txtbk p. 172
LET’S REVIEW THE STEPS…
The Steps of Preparing a Work Sheet
Part 1
• Txtbk pp. 160 A,B,C

 Write     Record      Record    Record      Prove the
  the        and         the       the        adjust-
Heading   prove the   supplies   prepaid       ment
            Trial      adjust-   insurance   columns
           Balance      ment       adjust-
                                    ment
The Steps of Preparing a Work Sheet
Part 2
• Txtbk pp. 160 A,B,C

  Calculate and      Extend the net   Total and rule the
  record the net     income or loss        Income
income or net loss    amount to the    Statement and
                      balance sheet    Balance Sheet
                                          columns
                 Practice!
• WT 6 – 3
  – WP p. 121, Txtbk p. 166
FINDING AND CORRECTING ERRORS
FINDING ERRORS
1st: Check the work sheets
2nd: If no errors found on the work sheets,
     check the postings to the general
     ledgers
3rd: If error not yet found, check journal
      entries
 FINDING ERRORS: TYPES OF ERRORS
 AND WHAT TO LOOK FOR
Check the differences between columns:

• A difference of 1 - $.01, $.10, $1.00 or $10.00
          – Most likely an addition error
• Can be divided evenly by 2
          – For example, if the difference between the column totals is $48.00, check to
            see if a $24.00 entry is recorded correctly
• Can be divided evenly by 9
          – Check for a transposition, such as 54 written as 45 or 19 written as 91
          – Check for a slide: a number moved to the right or left, i.e.$12.00 recorded as
            $120.00 or $350.00 recorded as $35.00
• Is an omitted amount
          – Look for an amount equal to the difference
              » On the work sheet
              » In the accounts and journals
FINDING ERRORS: IN THE WORK SHEET
• Check errors in the Trial Balance
     • Amounts copied correctly?
     • Recorded in the correct columns?


• Check for Errors in the Adjustments Columns
     • Is the amount for each adjustment correct?
     • Do debits equal credits for each adjustment?
          – Use the small letters to check


• Check for Errors in the Income Statement and
  Balance Sheet Column
     •   Copy the amount correctly?
     •   Amounts in the correct columns?
     •   Has net income/ net loss been calcualted correctly?
     •   Has net income/ net loss been recorded in the correct column?
CORRECTIONS: ON THE WORK SHEET
• Erase, correct, and recalculate
FINDING ERRORS: ON THE GENERAL LEDGERS
• If no error found on work sheets

  – Look back to Journal postings to the General
    Ledgers

    • Place a check mark next to each verified entry
   CORRECTING ERRORS: FROM THE
   GENERAL LEDGER
• Posted to the wrong general ledger account
       •   Draw a line through the entire incorrect entry
       •   Recalculate the account balance and correct the worksheet
       •   Record the posting in the correct account
       •   Recalculate the account balance and correct the work sheet

• Posted an incorrect amount
       •   Draw a line through the incorrect amount
       •   Write the correct amount just above the correct in the same space
       •   Recalculate the account balance
       •   Correct the account balance on the work sheet

• Posted to the wrong column
       •   Draw a line through the incorrect item in the account
       •   Record the posting in the correct amount column
       •   Recalculate the account balance
       •   Correct the account balance on the work sheet
   CORRECTING ERRORS: FROM THE
   GENERAL LEDGER
• Posted to the wrong general ledger account
       •   Draw a line through the entire incorrect entry
       •   Recalculate the account balance and correct the worksheet
       •   Record the posting in the correct account
       •   Recalculate the account balance and correct the work sheet

• Posted an incorrect amount
       •   Draw a line through the incorrect amount
       •   Write the correct amount just above the correct in the same space
       •   Recalculate the account balance
       •   Correct the account balance on the work sheet

• Posted to the wrong column
       •   Draw a line through the incorrect item in the account
       •   Record the posting in the correct amount column
       •   Recalculate the account balance
       •   Correct the account balance on the work sheet
    FINDING ERRORS: IN JOURNAL ENTRIES


• Do debits equal credits in each entry?
• Is each entry amount in the correct column?
• Are all column totals correct?
• Does the sum of debit column totals equal the
  sum of credit column totals?
• Are any transactions missing?
 PREVENTING ERRORS:


• Work carefully!
• Check the work at each step
• Use a printing calculator so you have a tape
 of calculations
              PRACTICE!
• WT 6 – 4
• OYO 6- 4
• App 6 – 4

• Homework: Mastery Problem

								
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