The 8-column Worksheet

Half year rule Using the Declining-Balance Method, the Canadian Government restricts the depreciation (CCA) recorded in the 1st year to be only HALF of the depreciation regularly calculated no matter when in the year purchased Why would I even want to depreciate more than I need to? The more the expenses, the lower your net income, the lower your net income the lower the taxes you pay!

Example A manufacturing building is purchased on Feb 1, 2016 for $640,000. What is the journal entry for the 1st year? CCA rate for this class of asset is 6%. Half-year rule applies.

Organizing our adjustments We’ve learned the following adjustments that are required at the end of a fiscal period: Unearned Revenue Supplies Prepaid Expenses (Rent, Insurance) Depreciation Adjusting entries are done to bring accounts to their true value according to the matching principle and revenue recognition principle The last adjustment necessary is that of late-arriving invoices that are received in the new fiscal period, which are related to the previous period (eg. Phone bill for December received in January) We need a way to organize our adjustments and their effects!

The 8-column worksheet Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition

Adjusting Entries and the Worksheet Adjusting Entries and the Worksheet List all accounts in order (assets, liabilities, then equity), just as you would on a trial balance. Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition

Adjusting Entries and the Worksheet Enter the debit and credit balances of each ledger account, and rule and total the trial balance. Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition

Adjusting Entries and the Worksheet Once all adjustments have been made, rule and total the Adjustments column. Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition

Adjusting Entries and the Worksheet Next, transfer all Balance Sheet accounts to the Balance Sheet column. Be sure to account for any adjustments. Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition

Adjusting Entries and the Worksheet Transfer all Income Statement accounts to the Income Statement column. Be sure to account for any adjustments. Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition

Adjusting Entries and the Worksheet Rule and total the Income Statement and Balance Sheet columns. Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition

Adjusting Entries and the Worksheet Calculate the Net Income (Revenue – Expenses). Net Income goes in the outer of the last four columns. Inner if net loss! Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition

Adjusting Entries and the Worksheet Rule and total the last four columns of the Worksheet. Both income statement and balance sheet totals should balance! Chapter 8 – Completing the Accounting Cycle | Accounting 1, 7th Edition