Chapter 15 Work Sheet for a Merchandising Business
Financial Information Shows whether a profit is being made or a loss is being incurred. Profit or loss information helps an owner or manager determine future changes. Also needed to prepare required tax reports.
An 8-Column Work Sheet For A Merchandising Business A work sheet is used to plan adjustments and sort financial statement information. Prepared at the end of each fiscal period.
Recording A Trial Balance On A Work Sheet To prove the equality of debits and credits in the general ledger, a trial balance is prepared. General ledger accounts are listed in the same order in which they appear in the GL. All accounts are listed regardless of whether there is a balance or not.
Adjustments Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period. The three accounts that need to be adjusted are: –Supplies –Prepaid Insurance –Merchandise Inventory Adjustments recorded on a work sheet are for planning purposes only.
Inventory The amount of goods on hand.
Merchandise Inventory The amount of goods on hand for sale to customers.
Merchandise Inventory The general ledger account in which merchandise inventory is recorded. This is an asset account with a normal debit balance. The two accounts used to adjust the merchandise inventory are Merchandise Inventory and Income Summary
Four questions to ask in analyzing the adjustment for Merchandise Inventory 1. What is the balance of Mer. Inventory? 2. What should the balance be for this account? 3. What must be done to correct the account balance? 4. What adjustment is made?
Supplies Adjustments The amount of supplies not used during a fiscal period represents an asset. The amount of supplies used during a fiscal period represents an expense. The adjustment for supplies is the amount of supplies used. The adjustment for prepaid insurance is the amount of insurance used or expired. A 10-column work sheet is often used by large merchandising companies with many accounts to be adjusted.