1. Chapter 8 Introduction

2. What is a Work Sheet?
Is an informal business paper used to organize and plan the information for the financial statements
Usually done in PENCIL
Done on columnar bookkeeping paper

3. Why? Why use the Work Sheet?
Accountants prefer to use the work sheet, rather than rely solely on the trial balance sheet
Organizes the accounts for a specific time period

4. Work Sheet
8 columns are used in the work sheet to allow accounts to make any adjustments required by certain accounting principles

5. Example of a Work Sheet
ALL ACOUNTS

6. Any changes?
No longer have debtors’ names associated with Accounts Receivable
No longer have creditors’ names associated with Accounts Payable

7. Control Accounts
Accounts Receivable Control Account: the sum of the balances of all individual Accounts Receivable
Accounts Payable Control Account: the sum of the balances of all individual Accounts Payable
More efficient for preparing work sheets and provides a more efficient presentation on the balance sheet (kept in separate records, look at in chapter 11)

8. Steps in Preparation of a work sheet
Write the headings on columnar paper
Company Name
Global Logistics
Work Sheet
Year Ended December 31, 20-4
Business Form
Period
OR May Look Like this:
Global Logistics Work Sheet Year Ended December 31, 20-4

9. 2. Record the trial balance on the work sheet
Enter ALL accounts with their balances in the first two columns (trial balance)
Trial balance MUST balance before moving on
DR = CR

11. 3. Make adjustments
The accounting clerk of Global Logistics took a physical inventory and prepared the listing shown in Figure 8.3 on page 280 in text.
The account balance should match the amount produced by the inventory listing: $526.00

12. 1 1

13. Adjusting Insurance Used
Trial Balance shows an amount of $6564 for prepaid insurance
This is out-of-date. Portions have expired.
The value is calculated by means of an insurance listing such as the one shown in Figure 8.5 page 282 (t)
Value remaining: $4070, used up $2494 ( =2494)

14. 1 2 1 2

15. Late-Arriving Purchases Invoices & Unearned Revenue
Late-Arriving Purchase Invoices
Telephone $245
Truck Repair
Printer Repair 85
Total $826
Customer made a $6 000 cash payment in advance of work to be completed in January, Cash had been put into bank account and Shipping Revenue was credited

16. 1 2 3 4 3 3 3 1 2 4

17. 3. Extend the Worksheet
Extend each of the amounts from the trial balance columns into one of the four columns to the right
You may have to add or subtract, depending on what is contained in the adjustments columns.
Income Statement  revenue & expenses (net income, net loss)
Balance sheet  assets, liabilities, capital & drawings
**Be sure that each account balance is transferred only once & that no item is missing

19. Total the four right-hand money columns
4. Balance the Work Sheet
Total the four right-hand money columns

21. 4. Balance the Work Sheet
b) Make sure the difference between Income Statement columns is equal to the difference between the Balance sheet columns.
Known as the BALANCING FIGURE

23. 4. Balance the Work Sheet
C) The work sheet MUST balance. If two figures do not agree, then one or more errors have been made
***YOU MAY NOT PROCEED to the preparation of the financial statements until the errors have been found & corrected!!!!

24. 5. The balancing figures
The work sheet tells the amount of the net income or net loss for the accounting period
Net income = Revenue (credit column) > (greater than) Expense (debit column)
Net Loss = Expense > (greater than) Revenue

25. When there is a profit the balancing figure is placed in the 2 outside columns. When there is a loss, the balancing figure is placed in the 2 inside columns

26. Rule off the work sheet
By drawing a single line under the net income totals and a DOUBLE line after the final four totals.
USE A RULER!!!

28. The Accounting Cycle Step 1  Transaction Occurs (source documents)
Step 2   Journal Entry
(daily record of transactions)
Step 3  Posting to General Ledger
(update all accounts)
Step 4  Trial balance
(DR=CR)
Step 5  Worksheet
(informal working doc, calc n/i, n/l)
Step 6  Financial Statements
(Income Statement & Balance sheet)

29. Classified Balance sheet

31. Homework: Ex. #1,2 p. 276-277 (t) p. 222-224 (w) – assigned yesterday
Review Questions #3-22 p. 276 (t) - assigned yesterday
NEW - Ex. 1 P. Tang p. 288 (t), p (w)