© 2014 Cengage Learning. All Rights Reserved. Learning Objectives LO5 Prepare the Balance Sheet and Income Statement columns of a work sheet. LO6 Total and rule the work sheet. LO7 Apply the steps for finding errors on a work sheet. © 2014 Cengage Learning. All Rights Reserved.

Extending Balance Sheet Account Balances on a Work Sheet Lesson 6-3 Extending Balance Sheet Account Balances on a Work Sheet LO5 A financial statement that reports the value of a business’ assets, liabilities, and owner’s equity on a specific date is called a balance sheet.

Extending Balance Sheet Account Balances on a Work Sheet Lesson 6-3 Extending Balance Sheet Account Balances on a Work Sheet LO5 Debit Balances without Adjustments 1 2 Debit Balances with Adjustments 3 Credit Balances without Adjustments

Extending Income Statement Account Balances on a Work Sheet Lesson 6-3 Extending Income Statement Account Balances on a Work Sheet LO5 A financial statement showing the revenue and expenses for a fiscal period is called an income statement.

Extending Income Statement Account Balances on a Work Sheet Lesson 6-3 Extending Income Statement Account Balances on a Work Sheet LO5 Sales Balance 1 2 Expense Balances without Adjustments Expense Balances with Adjustments 3

Recording Net Income and Totaling and Ruling a Work Sheet Lesson 6-3 Recording Net Income and Totaling and Ruling a Work Sheet LO6 The difference between total revenue and total expenses when total revenue is greater is called net income.

Recording Net Income and Totaling and Ruling a Work Sheet Lesson 6-3 Recording Net Income and Totaling and Ruling a Work Sheet LO6 Single Rule 1 2 Totals Single Rule 5 3 Net Income 4 Extend Net Income 6 Totals 7 Double Rule

Calculating and Recording a Net Loss on a Work Sheet Lesson 6-3 Calculating and Recording a Net Loss on a Work Sheet LO6 The difference between total revenue and total expenses when total expenses are greater is called a net loss.

Calculating and Recording a Net Loss on a Work Sheet Lesson 6-3 Calculating and Recording a Net Loss on a Work Sheet LO6 Single Rule 1 3 Net Loss 4 Extend Net Loss 2 Totals

CORRECTING AN ERROR IN POSTING TO THE WRONG ACCOUNT LESSON 6-4 LESSON 6-4 12/28/2018 CORRECTING AN ERROR IN POSTING TO THE WRONG ACCOUNT page 168 2 Correct entry 1 Incorrect entry 1. Draw a line through the entire incorrect entry. Recalculate the account balance and correct the work sheet. 2. Record the posting in the correct account. Recalculate the account balance, and correct the work sheet.

Finding and Correcting Errors on the Work Sheet Lesson 6-3 Finding and Correcting Errors on the Work Sheet LO7 Several different kinds of errors may be made when preparing a work sheet. Three examples There may be errors in the accounting records. There may be errors in calculations. An amount may be entered in the wrong column

The difference is 1 such as .01, .10, $1 or $10 – ADDITION Important Items Errors found on a worksheet may be erased because a worksheet is ___ a permanent document If a pair of work sheet columns DO NOT balance and an error cannot be found on the work sheet, look for posting from the journal to the _______ ledger accounts When two column totals are NOT in balance: First step is to subtract the smaller total from the larger total to find the difference The difference is 1 such as .01, .10, $1 or $10 – ADDITION The difference can be divided evenly by 2 with no remainder – look for that value ($48/2=$24) The difference can be divided by 9 with no remainder – TRANSPOSED ($45/9=$5 then look for 54 vs 45 or 19 vs 91) Also check for SLIDE – numbers moved to the right or left in an amount column ($12 recorded as $120 or $350 recorded as $35) The difference is an omitted amount – Look for that value in an account balance that was not extended

Important Items Check for Errors in the Trail Balance Column Check for Errors in the Adjustments Columns Check for Errors in the Income Statement and Balance Sheet Columns

Lesson 6-3 Audit Your Understanding 1. In which Balance Sheet column is net income recorded on the work sheet? ANSWER Balance Sheet Credit column

Lesson 6-3 Audit Your Understanding 2. In which Balance Sheet column is net loss recorded on the work sheet? ANSWER Balance Sheet Debit column

Lesson 6-3 Audit Your Understanding 3. What is the first step in checking for arithmetic errors when two column totals are not in balance? ANSWER Subtract the smaller total from the larger total to find the difference.

Lesson 6-3 Audit Your Understanding 4. What is one way to check for an error caused by transposed numbers? ANSWER The difference between two column totals can be divided evenly by 9.

Lesson 6-3 Audit Your Understanding 5. What term is used to describe an error that occurs when numbers are moved to the right or left in an amount column? ANSWER Slide