Chapter 7 Preparing A Six-Column Work Sheet

Learning Objectives Explain the purpose of the work sheet. Describe the parts of a six-column work sheet. Prepare a six-column work sheet. Calculate net income and net loss amounts. Define the accounting terms introduced in this chapter.

Work Sheet A working paper used to collect information from the ledger accounts on one sheet of paper.

Ruling “Drawing A Line” In accounting, a single rule drawn under a column of amounts means the entries above the rule are to be added or subtracted.

Matching Principle In accounting, expenses are always matched against revenue for the same period. See page 139

Net Income The amount left after expenses for the period have been subtracted from revenue for the period.

Net Loss When total expenses are greater than total revenue.

Summary Of Key Points The sixth step of the accounting cycle is preparing a work sheet. A work sheet is prepared to pull together all the information needed to complete the end of the fiscal period work. The trial balance section of the work sheet is completed first. Until the debits and credits are equal you can not start your income statement and balance sheet sections. Trial balance amounts are extended to the balance sheet sections and then to the income statement section. The work sheet is used to calculate the net income or net loss.