1. The Six-Column Worksheet
Chapter 8
The Six-Column Worksheet

2. Objectives Explain the purpose of a work sheet
Describe the parts of a six-column work sheet
Prepare a six-column work sheet
Calculate net income and net loss

3. What do you think
Why would it be difficult to use ledger accounts to prepare financial reports?
The work sheet organizes general ledger account information for the financial statements

4. 8.1 Objectives Understand the purpose of a work sheet
Identify the sections of a work sheet

5. the work sheet
A working paper used to collect information from the ledger accounts in one place
6th step in the accounting cycle
Used to
gather information needed to prepare the financial statements and
Complete other end-of-period activities

6. The work sheet There are 5 work sheet sections Heading
Account name section
Trial Balance section
Income Statement section
Balance Sheet section

7. Work sheet heading Contains three kinds of information WHO? WHAT?
The name of the business
WHAT?
The name of the accounting form
WHEN?
The period covered by the work sheet

8. Work sheet account name
Account names and numbers come from the General Ledger
Accounts listed on the work sheet in the same order as the GL
Assets
Liabilities
Owner’s Equity
Revenue
Expenses
ALL GL accounts are listed in the work sheet, even those with a ZERO balance

9. Work Sheet Account Name

10. Work sheet trial balance
The end-of-period balance in the GL for each account is entered into the appropriate amount column on the Trial Balance
If an account has a ZERO balance, a line is drawn in the normal balance column.

11. Work sheet trial balance
There are two steps to do after completing the Trial Balance
Rule the Trial Balance section
Ruling – drawing a single line, to indicate the columns are ready to be totaled
Total the Trial Balance section
Totaling – draw a double line, to indicate that total debits = total credits, and they’re totaled

12. Rule & Total Trial Balance

13. CLose What does this mean?
The columns on the work sheet must be ruled properly

14. ClassWork
8.1: text p. 200, wbk p.148
8.2: text p. 200, wbk p.148

15. What do you think
If a business has a net loss, what does this tell you about the accounting equation?
It’s not in balance
After completing the worksheet, you will know the net loss for the accounting period.

16. 8.2 Objectives How amounts are entered into the work sheet sections
How to calculate net income
How to enter totals
A summary of steps used to prepare a work sheet

17. Sections of the work sheet
Two financial statements prepared at the end of the accounting period
Balance Sheet
Income Statement
Both organized on the work sheet

18. Balance sheet section Contains the following:
Asset
Liability
Owner’s Equity
After proving the Trial Balance section, extend, or transfer, the appropriate amounts to the BS section
Extend debits to the Balance Sheet DR column
Extend credits to the Balance Sheet CR column

19. Income statement section
Amount balances extended:
Revenue
Expense
Revenue accounts have a normal credit balance
Expense accounts have a normal debit balance
Extend revenue accounts to the credit column of the IS
Extend expense accounts to the debit column of the IS

20. Totaling Balance sheet & income statement sections
A single rule is drawn under the DR and CR columns indicating their ready to be totaled
These amounts will not equal each other like the Trial Balance
They will equal each other after Net Income or Net Loss has been calculated

21. Totaling Balance sheet & income statement sections

22. Matching principle: Net Income or Net Loss
Requires matching expenses with revenue earned in accounting period
Measures profit by showing how much money was spent
Owners and managers use this to
Analyze results
Make decisions

23. Net income or net loss
To find Net Income or Net Loss – subtract the total expenses from the total revenue
Net Income - you have more money coming in than you have spent. Revenue > Expenses
Amount written as a DR on the Income Statement
Net Loss – you have spent more than you earned Revenue < Expenses
Amount written as a CR on the Income Statement
Once you subtract, you will determine the amount of the Net Income or Net Loss

24. Net Income 3 Steps
Skip a line after the last expense and write the words Net Income (or Net Loss) in the Account Name Column
On the same line, enter the net income amount in the Income Statement DR column
On the same line, enter the net income amount in the Balance Sheet CR column

25. Net income

26. Net income Increases capital because revenue is greater than expenses
Revenue and expense accounts are temporary accounts closed at the end of each period
Net Income gets transferred to Owner’s Equity at the end of the period
Net Income written as a CR to the Balance Sheet
For accuracy, subtract BS debit and credit columns to equal the Net Income
If it doesn’t match, there’s an error
Go back to make sure Trial Balance #s are correctly extended and written

27. Steps to complete work sheet
On the line under the net income amount, draw a single rule across the four columns
Bring down the Income Statement DR and CR column totals (after adding net income or net loss)
Bring down the Balance Sheet DR and CR column totals (after adding net income or net loss)
Draw a double rule under the four Balance Sheet and Income Statement totals
TOTAL DEBITS = TOTAL CREDITS

28. Completing the work sheet
Net Income

29. Completing the work sheet
Net Loss

30. Recap of 8 steps in preparing a six-column work sheet
Enter the heading
Enter the account numbers, names and balances
Show that Trial Balance DR = CR
Transfer the Trial Balance values to the IS and BS sections
Total the IS and BS columns
Determine the net income or net loss
Enter the net income or net loss in the IS and BS
Total and Double Rule the four columns

31. Close When does a business have a net income? Income Statement
Expenses (–)
Revenue (+)

32. Answer & Submit
Is Owner’s Capital extended to the BS or IS credit column?
What does a single rule indicate?
What does it mean to extend an amount?
What does the matching principle require?
Does net income increase or decrease owner’s equity?

33. classwork 8.3: text p. 207, wbk p. 148 8.4: text p. 212, wbk p. 149
*Appendix G – Ch 8, Prob 8A: text p. A-56, wbk p. 941*
*Graded Problem