Worksheet for a Service Business Chapter 7 Worksheet for a Service Business

Consistent Reporting General Ledger accounts contain info needed by managers and owners before if can be used, it must be analyzed, summarized & reported When the same accounting procedures are used in the same way it is called Consistent Reporting

7.1 Creating a Worksheet Fiscal Periods- length of time for which a business summarized and reports financial information (accounting time period) Many businesses use a 1-year fiscal period (because of federal and state tax reports once a year) Encore uses a 1 month period (starting August 1)

7.1-Worksheet Work Sheet- a columnar accounting form used to summarize the general ledger information needed to prepare financial statements Used for four reasons: Summarize general ledger account balances to prove debits=credits To plan needed changes to bring account balances up to date Separate general ledger account balances Calculate net income/net loss in fiscal period

7.1 Preparing Worksheet Heading Name of Company Name of Report (Worksheet) Date of Report (For Year Ended)

7.1 Preparing a Trial Balance on a Worksheet Trial Balance- the totals of all debit and credit account balances shown in a proof of equality This information is taken from general ledger balances Account titles are listed in the same order as the Chart of Accounts

7.1 Preparing a Trial Balance Steps Write the general ledger account titles Write the general ledger debit account balances in Trial Balance Debit Column. Write the general ledger credit account balances in Trial Balance Credit Column. Leave a blank space if there is no balance Rule a single line across the two Trial Balance columns below the last line. (Show these columns need to be totaled) Add both Trial Balance Debit and Credit columns. (If they don’t =, recheck general ledger balances and math) Write totals below single line Rule double lines

7.1 Review Terms Review Audit Your Understanding #1-2 Work Together #3 On Your Own #4

7.2 Planning Adjusting Entries on Worksheet Please read page 154 Adjustments- changes recorded on a work sheet to update general ledger accounts at the end of fiscal period

7.2 Supplies Adjustment Write the debit amount in the work sheet’s Adjustment Debit column: Supplies Expense Write the credit amount in the Adjustment Credit column: Supplies Label the two parts of the adjustment with a small letter (a)-identifies to parts of the same adjustment

7.2 Prepaid Insurance Adjustment On August 31, Ms. Trevino checked the insurance records and found that the value of insurance coverage remaining was $1,100.00 (used 100.00 in period). How can this be shown in the work sheet as an adjustment?

7.1 Proving the Adjustments Column of a Work Sheet After all adjustments are recorded in a work sheet’s Adjustments column, the equality of debits and credits for the two columns is proved by totaling and ruling the two columns

7.2 Review Terms Review Audit Your Understanding #1-2 Work Together #3-4 On Your Own #5-6

7.3 Extending Financial Statement Information on a Work Sheet Extending Balance Sheet Account Balances on a Work Sheet Show balances from the Balance Sheet on the Work Sheet See page 159

Extending Account Balances Extend the balance of each account to Debit Column (without adjustments) Calculate up-to-date Adjusted Balances Extend the balance of each account to Credit Column (without adjustments)

Extending Income Statement Balances Income Statement- a financial statement showing the revenue and expenses for a fiscal period Extend Sales account to Credit Column Extend Expenses without Adjustments Extend Expenses with Adjustments

Recording Net Income AND Totaling Net Income- difference between total revenue and total expenses; when revenue is greater Rule a single line across Income and Balance Total Income and Balance Sheet Columns Calculate Net Income (write Net Income) Rule a single line below the Net Inc Amts Add subtotal and net income for each column Write proving totals and Rule a double line

Preparation Summary Between page 160 and 161

7.3 Review: p. 163 Terms Review Audit Your Understanding #1-4 Work Together #5-7 On Your Own # 8-10

7.4 Finding and Correcting Errors CALCULATION ERRORS- When two columns are not in Balance if difference is 1 like $.01, $.10, $1.00 check Addition if difference is divisible by 2 check for correct recording if difference is divisible by 9 check for transposed numbers LOOK for OMITTED Amounts

Correcting An Incorrect Amount- Draw a line through incorrect amount Write correct amount Recalculate Balances and correct Posting to the wrong column- Draw a line through incorrect item Record posting in correct column Recalculate balance

Errors, cont. Checking General Journal- Do Debits = Credits? Is each general journal entry amount recorded in correct column? Is info in Account Title Correct for each entry? Are all transactions recorded? WORK CAREFULLY TO PREVENT ERROR

7.4 Review- p. 167 Audit Your Understanding #1-4 Work Together # 4-6 On Your Own # 7-9