Beginning an 8-Column Work Sheet for a Merchandising Business

Chapter 14, Section 2

The Work Sheet

The work sheet is used to summarize financial information needed to prepare financial statements

Step to prepare a work sheet: Heading – Company Name, Work Sheet, Date Trial Balance – Prove debits and credits are equal Adjustments – update assets and expense

accounts Extend Balances – Separate according to Income

Statement and Balance Sheet Calculate and Record Net Income/Loss

Recording a Trial Balance on aWork Sheet

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21. Account titles

2. Account balances

3. Total, prove, and rule the debit and credit columns

Analyzing and Recording Supplies Adjustments

Up to this point, we have only recorded the purchases of new supplies

We must bring the asset and expense accounts up-to-date to reflect supplies used

Example: Supplies—Office account balance = $3,480.00 Actual office supplies on hand = $750.00

Subtract these two numbers to determine amount of adjustment $3,480.00 – 750.00 = $2,730.00

Debit Supplies Expense—OfficeCredit Supplies—Office

Repeat for Supplies—Store account

Analyzing and Recording Supplies Adjustments

Adj. (a) 2,730.00

Supplies Expense—Office

Dec. 31 Bal. 3,480.00 Adj. (a) 2,730.00

(Adj Bal. 750.00)

Supplies—Office

Adj. (b) 2,910.00

Supplies Expense—Store

Dec. 31 Bal. 3,944.00 Adj. (b) 2,910.00

(Adj Bal. 1,034.00)

Supplies—Store

Recording Supplies Adjustments on a Work Sheet

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1. Write the debit amounts in the Adjustments Debit column.

2. Write the credit amounts in the Adjustments Credit column.

3. Label the two parts of the Supplies—Office adjustment with small letter (a) in parentheses.

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4. Label the two parts of the Supplies—Store adjustment with small letter (b) in parentheses.

Analyzing and Recording aPrepaid Insurance Adjustment

We must bring the asset and expense accounts up-to-date to reflect insurance used.

Example: Prepaid Insurance account balance =

$5,800.00 Value of Insurance = $2,630.00

Subtract these two numbers to determine amount of adjustment. $5,800.00 – 2,630.00 = $3,170.00

Debit Insurance Expense; Credit Prepaid Insurance

Analyzing and Recording aPrepaid Insurance Adjustment

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1. Enter the amount of insurance used in the Adjustments Credit column.

2. Enter the same amount in the Adjustments Debit column.

3. Label the two parts of the adjustment with a small letter (c)in parentheses.

Problems

Work Together 14-2 (text pg. 414)

On Your Own 14-2 (text pg. 414)

Application 14-2 (text pg. 438)