Preparing a worksheet Chapter 7 Section 1

What is the worksheet Worksheet is used for a couple of things: Recheck our trial balance To make adjustments to accounts To prepare our balance sheet at the end of the year To prepare out income statement at the end of the year To determine our net income

The 6th step of the Accounting Cycle: The work Sheet Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash   Petty Cash Account Rec. - Kids Time Accounts Rec. - Learn N Play Supplies

Step #1 Take all of the balances from the general ledger and place them into the Trial balance columns of the worksheet. Total both the debit and the credit columns to ensure that you are in balance and that you have correctly copied the balances from the ledger.

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 Prepaid Insurance 1200 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insurance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 Net Income 156791 156791

Work on “On Your Own” on page 153

Adjustments Section 2

Definition of adjustment The number of things change from the beginning of the year to the end of the year. 1/1/0X 12/31/0X Supplies ------------------ Supplies 100 10 Prepaid Insurance -------- PPI 1200 1100

We record those changes (adjustments) in the adjustment columns. Because both of these accounts we are adjusting are assets. If the number goes up we Debit/Increase the balance If it goes down we Credit/Decrease the balance

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 2564 Prepaid Insurance 1200 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insurance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 15791 2664 Net Income a b b a

Please work “On Your Own” on page 158

Section 3 Extending Amounts Across the worksheet Chapter 8 Section 3 Extending Amounts Across the worksheet

Next step in preparing a work sheet After placing all of the accounts in the proper places and putting the numbers that correspond with them, make sure that the two columns equal. Step 2 Take the numbers and move them into the proper columns Balance statement accounts go to columns 7 and 8 (i.e. cash through capital) Income statement accounts go to columns 5 and 6 (i.e. revenue/sales through expenses)

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 2564 Prepaid Insurance 1200 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insurance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 15791 2664 Net Income

Three major rules to remember Accounts that go on the Income Statement Revenue, expenses Accounts that go on the Balance Sheet Assets, Liabilities, Owners Equity

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 2564 2187 Prepaid Insurance 1200 1100 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insurance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 15791 2664 Net Income

Three major rules to remember Accounts that go on the Income Statement Revenue, expenses Accounts that go on the Balance Sheet Assets, Liabilities, Owners Equity If all else fails, everything above the INCOME SUMMARY goes in the balance sheet columns, every thing below goes in the income statement columns

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 2564 2187 Prepaid Insureance 1200 1100 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insureance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 15791 2664 Net Income

Total the columns Total the columns in the income statement Total the columns in the balance sheet

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 2564 2187 Prepaid Insurance 1200 1100 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insurance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 15791 2664 3312 12479 11380 Net Income

Finishing the work sheet In the income statement Take the credit side and subtract out the debit side. In the balance sheet columns Take the debit side and subtract out the credit side.

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 2564 2187 Prepaid Insureance 1200 1100 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insureance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 15791 2664 3312 12479 11380 Net Income 1099

Finishing the work sheet In the income statement Take the credit side and subtract out the debit side. In the balance sheet columns Take the debit side and subtract out the credit side. Rule of thumb after subtracting the numbers it always goes under the smaller of the amounts so that we may get it to equal.

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 2564 2187 Prepaid Insureance 1200 1100 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insureance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 15791 2664 3312 12479 11380 Net Income 1099

For Month Ending August 31 Encore Music Worksheet For Month Ending August 31 Account Title Trial Balance Adjustments Income Statement Balance Sheet Cash 8272   Petty Cash 200 Account Rec. - Kids Time 100 Accounts Rec. - Learn N Play 20 Supplies 4751 2564 2187 Prepaid Insurance 1200 1100 Accounts Pay - Ling Music Supp 1360 Accounts Pay - Sullivan Off. Supp Barbara Trevino, Cap 10000 Barbara Trevino, Draw 600 Income Summary Sales 4411 Advertising Expense 2730 Insurance Expense Miscellaneous Expense 10 Rent Expense 250 Supplies Expense Utilities Expense 115 15791 2664 3312 12479 11380 Net Income 1099

Let’s complete the worksheet Let’s complete the worksheet. Do On Your Own on Page 163 in the textbook. Problems 7-1, 2, 3, 4, 5