Work Sheet for a Merchandising Business Chapter 15 Work Sheet for a Merchandising Business

Worksheet info A worksheet shows whether a profit is being made or a loss is being incurred and are used to plan adjustments and sort financial statement information. A worksheet can be prepared whenever needed but always at the end of each fiscal period.

TRANSFERRING GENERAL LEDGER ACCOUNT BALANCES TO A WORK SHEET RECORDING A TRIAL BALANCE ON A WORK SHEET TRANSFERRING GENERAL LEDGER ACCOUNT BALANCES TO A WORK SHEET 1 2 1. Write the titles of the general ledger accounts. 2. Write the balance of each account. 3. Total, prove, and rule the debit and credit columns. 3 Lesson 15-1, page 366-368

Adjustments After posting is completed at the end of the fiscal period some accounts are not up to date. Adjustments must be made to Merchandise Inventory, Supplies and Insurance

PLANNING ADJUSTMENTS ON A WORK SHEET Merchandise Inventory Debit Credit Merchandise Inventory Jan. 1 Bal. 270,480.00 Lesson 15-1, page 368

Merchandise Inventory During a fiscal period, the amount of merchandise on hand increase each time merchandise is purchased but this is recorded in the purchases account. The amount of merchandise on hand decreases each time merchandise is sold but sales are recorded in sales account. Therefore Merchandise inventory needs to be adjusted to reflect these changes.

Four questions to ask 1. What is the balance of Merchandise Inventory? $270,480.00 2. What should the balance be for this account? $254,640.00 3. What must be done to correct the account balance? Decrease $15,840.00 4. What adjustments is made? Debit Income Summary $15,840.00 Credit Merchandise Inventory $15,840.00

ANALYZING A MERCHANDISE INVENTORY ADJUSTMENT AFTER ADJUSTMENTS BEFORE ADJUSTMENTS Income Summary Adj. (a) 15,840.00 Merchandise Inventory Jan 1 Bal. 270,480.00 Jan 1 Bal. 270,480.00 Adj. (a) 15,840.00 (New Bal. 254,640.00) Lesson 15-1, page 369

RECORDING A MERCHANDISE INVENTORY ADJUSTMENT 3 2 1 1. Write the debit amount. 2. Write the credit amount. 3. Label the two parts of this adjustment. Lesson 15-1, page 370

Merchandise Inventory ANALYZING AN ADJUSTMENT WHEN ENDING MERCHANDISE INVENTORY IS GREATER THAN BEGINNING MERCHANDISE INVENTORY AFTER ADJUSTMENT Merchandise Inventory Jan 1 Bal. 294,700.00 Adj. (a) 4,200.00 (New Bal. 298,900.00) Income Summary Adj. (a) 4,200.00 Lesson 15-1, page 370

Complete 15-1 Work Together and On Your Own

Supplies The amount of supplies not used during the fiscal period represents an asset. The amount of supplies used during a fiscal period represents an expense. The supplies account at the end of the fiscal period does not reflect supplies used therefore adjustments must be made.

ANALYZING A SUPPLIES ADJUSTMENT AFTER ADJUSTMENT BEFORE ADJUSTMENT Supplies Expense—Office Adj. (b) 4,730.00 Supplies—Office Dec. 31 Bal. 6,480.00 Dec. 31 Bal. 6,480.00 Adj. (b) 4,730.00 (New Bal. 1,750.00) Lesson 15-2, page 373

RECORDING SUPPLIES ADJUSTMENTS 3 2 1 1. Write the debit amounts. 2. Write the credit amounts. 3. Label the two parts of this adjustment. Lesson 15-2, page 374

ANALYZING A PREPAID INSURANCE ADJUSTMENT AFTER ADJUSTMENT BEFORE ADJUSTMENT Insurance Expense Adj. (d) 3,170.00 Prepaid Insurance Dec 31 Bal. 5,800.00 Dec 31 Bal. 5,800.00 Adj. (d) 3,170.00 (New Bal. 2,630.00) Lesson 15-2, page 375

RECORDING A PREPAID INSURANCE ADJUSTMENT 3 2 1 1. Write the debit amount. 2. Write the credit amount. 3. Label the two parts of this adjustment. Lesson 15-2, page 376

Complete 15-2 Work Together and On Your Own

COMPLETING AN 8-COLUMN WORK SHEET 2 1 1. Extend balance sheet items to Balance Sheet columns. 2. Extend income statement items to Income Statement columns. 3. Total Income Statement and Balance Sheet columns. 4. Calculate net income or net loss. 5. Extend net income or net loss to Balance Sheet Debit or Credit column. 6. Total Income Statement and Balance Sheet columns. 7. Check that totals are in balance. 3 4 5 6 7 Lesson 15-3, page 378

A 10-COLUMN WORK SHEET FOR A MERCHANDISING BUSINESS (LEFT PAGE) 1. Record the trial balance. 2. Plan the adjustments. 1 2 Lesson 15-3, page 382

A 10-COLUMN WORK SHEET FOR A MERCHANDISING BUSINESS (RIGHT PAGE) 3. Extend the balances in the Trial Balance columns to the Adjusted Trial Balance columns. 5 3 4. Total, prove, and rule the Adjusted Trial Balance columns. 5. Extend the amounts in the Adjusted Trial Balance columns to the appropriate Income Statement and Balance Sheet columns. 6. Total, prove, and rule the appropriate Income Statement and Balance Sheet columns. 4 6 Lesson 15-3, page 383

10 Column Worksheet Large Businesses with many accounts to be adjusted at the end of the fiscal period may use a 10 column Worksheet. Businesses may choose to use 8 or 10 column worksheet. Use the 8 column worksheet reduces the amount of time to complete

Complete 15-3 Work Together and On Your Own