1. ADJUSTING ENTRIES AND THE WORK SHEET
CHAPTER FIVE
ADJUSTING ENTRIES AND THE WORK SHEET

2. END OF PERIOD ADJUSTMENTS
Changes occur that affect the business’ financial condition:
equipment wearing out
prepaid insurance and supplies being used up
employees earning wages that have not yet been paid
Since these events have not been entered into the accounting system, ADJUSTING ENTRIES must be made.

3. MATCHING PRINCIPLE
Requires the matching of REVENUES EARNED during an accounting period with the EXPENSES INCURRED
Provides best measure of net income
Necessitates accounts be brought up to date before financial statements are prepared

4. FISCAL YEAR A twelve-month period of time used as an accounting period
Does not need to be the same as a calendar year
Many businesses schedule fiscal year to end when business is slow

5. ADJUSTING ENTRIES Let’s look at some adjusting entries
for Jessica Jane’s Campus Delivery.

6. SUPPLIES
During June, Jessica purchased supplies for $80. These were debited to the Supplies account.
PURCHASED
IN JUNE
SUPPLIES
$80

7. SUPPLIES
During June, Jessica purchased supplies for $80. These were debited to the Supplies account.
SUPPLIES
$80
According to an
inventory of Supplies,
there are only $20
of Supplies on hand
at the end of June.
BALANCE
$80

8. SUPPLIES
During June, Jessica purchased supplies for $80. These were debited to the Supplies account.
SUPPLIES
$80
But unless there is an
adjusting entry made,
$80 of Supplies will be
shown on the
Balance Sheet.
BALANCE
$80

9. SUPPLIES
During June, Jessica purchased supplies for $80. These were debited to the Supplies account.
SUPPLIES
$80
ADJUSTING ENTRY
NEEDED!!!!
BALANCE
$80

10. SUPPLIES $80 $80 $80 Supplies - $20 Remaining SUPPLIES Bal.
$60 Used Up

11. SUPPLIES $60 is credited to $80 Supplies to remove the
amount of supplies
used during June.
$80
Bal.
$80
$60

12. SUPPLIES $80 $60 $80 $60 $60 is debited to Supplies Expense
Bal.
$80
$60
$60 is debited to Supplies Expense
to recognize the amount of
supplies used during June.

13. SUPPLIES $80 $60 $80 $60 $20 Now Balance Sheet will show $20 of
SUPPLIES EXPENSE
$80
$60
Bal.
$80
$60
$20
Bal.
Now Balance Sheet
will show $20 of
Supplies!

14. And the Income Statement
SUPPLIES
SUPPLIES
SUPPLIES EXPENSE
$80
$60
Bal.
$80
Bal.
$60
$60
$20
Bal.
And the Income Statement
will show $60 of Supplies
used during June.

15. PREPAID INSURANCE
During June, Jessica paid $200 for an eight-month liability insurance policy with coverage beginning on June 1.
8-month policy
June 1 - Jan. 31
PREPAID INSURANCE
$200

16. of one month’s insurance
PREPAID INSURANCE
During June, Jessica paid $200 for an eight-month liability insurance policy with coverage beginning on June 1.
PREPAID INSURANCE
$200
Now that June is over, we
need to remove the cost
of one month’s insurance
from this account.

17. PREPAID INSURANCE $200 $200 for 8 months: $200 ÷ 8 = $25 per month

18. June’s insurance coverage
PREPAID INSURANCE
PREPAID INSURANCE
$200
$25
Prepaid Insurance is
credited $25 to remove
June’s insurance coverage
that has expired.

19. PREPAID INSURANCE $200 $25 $25 Insurance Expense is debited
$25 to recognize the amount
of insurance coverage for June.

20. The Balance Sheet will show
PREPAID INSURANCE
PREPAID INSURANCE
INSURANCE EXPENSE
$200
$25
$25
$175
Bal.
The Balance Sheet will show
$175 (7 months) of
Prepaid Insurance!

21. The Income Statement will
PREPAID INSURANCE
PREPAID INSURANCE
INSURANCE EXPENSE
$200
$25
$25
Bal.
$25
$175
Bal.
The Income Statement will
show $25 (1 month) of
insurance consumed!

22. WAGES EXPENSE
Jessica paid her part-time employees $650 on June 27. Since then, they have earned an additional $50 but have not been paid yet.
WAGES EXPENSE
$650
$650 does not include all of the
wages earned by employees
during June.
$650
Balance

23. WAGES EXPENSE
Jessica paid her part-time employees $650 on June 27. Since then, they have earned an additional $50 but have not been paid yet.
WAGES EXPENSE
$650
An ADJUSTING ENTRY
is needed !
$650
Balance

24. $50 debit to Wages Expense for the additional wages
$650
$50
$50 debit to Wages Expense
for the additional wages
earned during June.

25. WAGES EXPENSE $650 $50 $50 Jessica Jane owes the employees
WAGES PAYABLE
$650
$50
$50
Jessica Jane owes the employees
for the additional wages.
This liability is recorded in
the Wages Payable account.

26. The Income Statement will
WAGES EXPENSE
WAGES EXPENSE
WAGES PAYABLE
$650
$50
$50
$700
Bal.
The Income Statement will
show ALL wages earned
by employees in June!

27. WAGES EXPENSE $650 $50 $50 $50 $700 WAGES EXPENSE WAGES PAYABLE
Bal.
$700
Bal.
Balance Sheet will show liability
for wages earned in June
that will be paid in July.

28. HISTORICAL COST PRINCIPLE
Assets are recorded at their actual cost.
The cost remains on the books as long as the business owns the asset.
No adjustments are made for changes in market value.

29. USEFUL LIFE
The period of time that an asset is expected to help produce revenues.
Useful life expires as a result of wear and tear, or because it no longer satisfies the needs of the business.
As this happens, depreciation expense should be recognized and the value of the asset should be reduced.

30. DEPRECIATION EXPENSE
A method of matching an asset’s original cost against the revenue produced over the useful life.
Many depreciation methods (We will use the Straight-Line method.)
Depreciation expense is based on estimates of useful lives and salvage values.

31. SALVAGE VALUE
The expected market value or selling price of an asset at the end of its useful life
Also called:
Scrap Value or
Residual Value

32. DEPRECIATION EXAMPLE
Jessica has motor scooters with an estimated useful live of 3 years, no salvage value, and original cost of $3,600.
Because Jessica expects the scooters
to be of no value when the three years
are over, the whole $3,600 cost needs
to be spread over the next three years.

33. STRAIGHT-LINE METHOD = = 1st step: Calculate Depreciable Cost.
FORMULA:
Original Cost
Salvage Value
Depreciable Cost = =
$3,600 $0
$3,600

34. Calculating Depreciation Expense
2nd step: Determine depreciation expense for this accounting period.
FORMULA:
Depreciable Cost
$3,600
Estimated Useful Life
Since we are trying to compute
depreciation for one month,
we will use months instead
of years.

35. Calculating Depreciation Expense
2nd step: Determine depreciation expense for this accounting period.
FORMULA:
Depreciable Cost
$3,600
Estimated Useful Life
36 months

36. Calculating Depreciation Expense
2nd step: Determine depreciation expense for this accounting period.
FORMULA:
Depreciable Cost
$3,600
$100 per month
Estimated Useful Life
36 months

37. Now that we know depreciation for June is $100, let’s figure out the
DEPRECIATION EXPENSE
Now that we know depreciation for
June is $100, let’s figure out the
adjusting entry.

38. DEPRECIATION EXPENSE $3,600 DELIVERY EQUIPMENT
We do NOT adjust this account.
It should always reflect the
ORIGINAL COST of the asset.

39. DEPRECIATION EXPENSE $3,600 $100 DELIVERY EQUIPMENT
ACCUMULATED DEPRECIATION - DELIVERY EQUIPMENT
$3,600
$100
Depreciation is credited to this
account instead of
the asset account.

40. ACCUMULATED DEPRECIATION
Contra-Asset account
“Contra” means opposite
Credit Balance account
balance is “opposite” from the (debit balance) assets
It is shown in the asset section of the Balance Sheet as a deduction from its related asset.

41. BOOK VALUE The value carried on the books or in the accounting records
Book Value equals:
Original Cost minus Accumulated Depreciation
Also called Undepreciated Cost

42. DEPRECIATION EXPENSE $3,600 $100 $100
ACCUMULATED DEPRECIATION - DELIVERY EQUIPMENT
MOTOR SCOOTERS
$3,600
$100
DEPRECIATION EXP. - DEL. EQUIP.
$100

43. WORK SHEET Pulls together all of the information needed to:
enter adjusting entries and
prepare financial statements
Not a financial statement
Not a formal part of the accounting system
Just a tool used by accountants
Commonly in a 10-column format

44. PREPARING A WORKSHEET 5 STEPS Step 2: Prepare the Adjustments.
Step 1: Prepare the Trial Balance.
Step 2: Prepare the Adjustments.
Step 3: Prepare the Adjusted Trial Balance.
Step 4: Extend Adjusted Balances to the Income Statement & Balance Sheet columns.
Step 5: Complete the Work Sheet.

45. Heading includes: Name of Company Worksheet Time Period Covered
Jessica Jane’s Campus Delivery Work Sheet For Month Ended June 30, 20--
TRIAL BALANCE
ACCOUNT TITLE
DEBIT
CREDIT
Heading includes:
Name of Company
Worksheet
Time Period Covered

46. Step #1: Prepare the Trial Balance (before any adjustments)
Jessica Jane’s Campus Delivery Work Sheet For Month Ended June 30, 20--
TRIAL BALANCE
ACCOUNT TITLE
DEBIT
CREDIT
Step #1: Prepare the Trial Balance
(before any adjustments)
in the first pair of
amount columns.

47. This is the same Trial Balance from Chapter Three. Now being shown
ADJUSTMENTS
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
Cash
370
Accounts Receivable
650
Supplies 80
Prepaid Insurance
200
Delivery Equipment
3600
Accum. Depr.-Delivery Eq.
Accounts Payable
1800
Wages Payable
Jessica Jane, Capital
This is the same
Trial Balance
from Chapter Three.
Now being shown
on a 10-column worksheet
2000
Jessica Jane, Drawing
150
Delivery Fees
2150
Wages Expense
650
Rent Expense
200
Supplies Expense
Telephone Expense 50
Insurance Expense
Depr. Expense-Del. Equip.
5950
5950

48. Step #2: Prepare the adjustments.
TRIAL BALANCE
ADJUSTMENTS
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
Cash
370
Accounts Receivable
650
Supplies 80
Prepaid Insurance
200
Delivery Equipment
3600
Accum. Depr.-Delivery Eq.
Accounts Payable
1800
Wages Payable
Jessica Jane, Capital
Step #2: Prepare the
adjustments.
2000
Jessica Jane, Drawing
150
Delivery Fees
2150
Wages Expense
650
Rent Expense
200
Supplies Expense
Telephone Expense 50
Insurance Expense
Depr. Expense-Del. Equip.
5950
5950

49. Let’s record the supplies adjustment $60 debit to Supplies Expense;
TRIAL BALANCE
ADJUSTMENTS
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
Cash
370
Accounts Receivable
650
Supplies 80
Prepaid Insurance
200
Delivery Equipment
3600
Accum. Depr.-Delivery Eq.
Accounts Payable
1800
Wages Payable
Jessica Jane, Capital
Let’s record the supplies adjustment
we computed earlier:
$60 debit to Supplies Expense;
$60 credit to Supplies.
2000
Jessica Jane, Drawing
150
Delivery Fees
2150
Wages Expense
650
Rent Expense
200
Supplies Expense
Telephone Expense 50
Insurance Expense
Depr. Expense-Del. Equip.
5950
5950

50. Adjustments are identified with a letter in parentheses.
TRIAL BALANCE
ADJUSTMENTS
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
Cash
370
Accounts Receivable
650
Supplies 80
(a) 60
Prepaid Insurance
200
Delivery Equipment
3600
Accum. Depr.-Delivery Eq.
Accounts Payable
1800
Adjustments are identified
with a letter in parentheses.
Wages Payable
Jessica Jane, Capital
2000
Jessica Jane, Drawing
150
Delivery Fees
2150
Wages Expense
650
Rent Expense
200
Supplies Expense
(a) 60
Telephone Expense 50
Insurance Expense
Depr. Expense-Del. Equip.
5950
5950

51. The remaining adjustments “Adjustments” columns
TRIAL BALANCE
ADJUSTMENTS
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
Cash
370
Accounts Receivable
650
Supplies 80
(a) 60
Prepaid Insurance
200
Delivery Equipment
3600
Accum. Depr.-Delivery Eq.
Accounts Payable
1800
The remaining adjustments
are entered on the
worksheet and the
“Adjustments” columns
are totaled.
Wages Payable
Jessica Jane, Capital
2000
Jessica Jane, Drawing
150
Delivery Fees
2150
Wages Expense
650
Rent Expense
200
Supplies Expense
(a) 60
Telephone Expense 50
Insurance Expense
Depr. Expense-Del. Equip.
5950
5950

52. TRIAL BALANCE
ADJUSTMENTS
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
Cash
370
Accounts Receivable
650
Supplies 80
(a) 60
Prepaid Insurance
200
(b) 25
Delivery Equipment
3600
Accum. Depr.-Delivery Eq.
(d)
100
Accounts Payable
1800
Wages Payable
(c) 50
Jessica Jane, Capital
2000
Jessica Jane, Drawing
150
Delivery Fees
2,150
(c)
Wages Expense
650 50
Rent Expense
200
Supplies Expense
(a) 60
Telephone Expense 50
Insurance Expense
(b) 25
Depr. Expense-Del. Equip.
(d)
100
5950
5950

53. The Adjustments BALANCE!!!
TRIAL BALANCE
ADJUSTMENTS
ACCOUNT TITLE
DEBIT
CREDIT
DEBIT
CREDIT
Cash
370
Accounts Receivable
The Adjustments
BALANCE!!!
650
Supplies 80
(a) 60
Prepaid Insurance
200
(b) 25
Delivery Equipment
3600
Accum. Depr.-Delivery Eq.
(d)
100
Accounts Payable
1800
Wages Payable
(c) 50
Jessica Jane, Capital
2000
Jessica Jane, Drawing
150
Delivery Fees
2150
(c)
Wages Expense
650 50
Rent Expense
200
Supplies Expense
(a) 60
Telephone Expense 50
Insurance Expense
(b) 25
Depr. Expense-Del. Equip.
(d)
100
5950
5950
235
235

54. Adjusted Trial Balance.
ACCOUNT TITLE
TRIAL BAL.
ADJUSTMENTS
ADJ. TRIAL BAL.
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
Accts. Rec.
650
Supplies 80
(a) 60
Ppd. Ins.
200
(b) 25
Del. Eq.
3600
Step #3: Prepare the
Adjusted Trial Balance.
A. D.-Del. Eq.
(d)
100
Accts. Pay.
1800
Wages Pay.
(c) 50
J J, Cap.
2000
J J, Drawing
150
Del. Fees
2150
(c)
Wages Exp.
650 50
Rent Exp.
200
Sup. Exp.
(a) 60
Tel. Exp 50
Ins. Exp.
(b) 25
Depr. Exp.
(d)
100
5950
5950
235
235

55. $370 $0 $370 +/- = +/- = Adjusted Balance Balance before Adjustments
ACCOUNT TITLE
TRIAL BAL.
ADJUSTMENTS
ADJ. TRIAL BAL.
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
Supplies 80
(a) 60
Ppd. Ins.
200
(b) 25
Del. Eq
$370
3600
+/- $0 =
$370
A. D..-Del Eq.
(d)
100
Accts Pay
1800
Wages Pay
Balance before Adjustments
(c)
Adjusted Balance 50
+/-
Adjustment =
J J, Cap
2000
J J, Drawing
150
Del. Fees
2150
(c)
Wages Exp.
650 50
Rent Exp.
200
Sup. Exp.
(a) 60
Tel. Exp. 50
Ins. Exp.
(b) 25
Depr. Exp.
(d)
100
5950
5950
235
235

56. $650 $0 $650 +/- = +/- = Balance before Adjustments Adjusted Balance
ACCOUNT TITLE
TRIAL BAL.
ADJUSTMENTS
ADJ. TRIAL BAL.
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 80
(a) 60
Ppd. Ins.
200
(b) 25
Del. Eq.
3600
A. D..-Del Eq.
(d)
100
$650
+/- $0 =
$650
Accts. Pay.
1800
Wages Pay
(c) 50
J J, Cap
Balance before Adjustments
2000
+/-
Adjusted Balance
Adjustment =
J J, Drawing
150
Del. Fees
2150
(c)
Wages Exp
650 50
Rent Exp.
200
Sup. Exp.
(a) 60
Tel. Exp. 50
Ins. Exp.
(b) 25
Depr. Exp.
(d)
100
5950
5950
235
235

57. - $80 $60 $20 = +/- = Balance before Adjustments Adjusted Balance
ACCOUNT TITLE
TRIAL BAL.
ADJUSTMENTS
ADJ. TRIAL BAL.
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 80
(a) 60 20
Ppd. Ins.
200
(b) 25
Del. Eq.
3600
A. D.-Del. Eq.
(d)
100
Accts Pay
1800
$80 -
$60 =
$20
Wages Pay
(c) 50
J J, Cap
2000
J J, Drawing
Balance before Adjustments
150
Adjusted Balance
+/-
Adjustment =
Del. Fees
2150
(c)
Wages Exp
650 50
Rent Exp
200
Sup. Exp.
(a) 60
Tel. Exp. 50
Ins. Exp.
(b) 25
Depr. Exp.
(d)
100
5950
5950
235
235

58. This process continues Adjusted Trial Balance.
ACCOUNT TITLE
TRIAL BAL.
ADJUSTMENTS
ADJ. TRIAL BAL.
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 80
(a) 60 20
Ppd. Ins.
200
(b) 25
Del. Eq.
3600
A. D.-Del. Eq.
(d)
100
Accts. Pay.
1800
Wages Pay.
(c) 50
This process continues
until ALL accounts
are included in the
Adjusted Trial Balance.
J J, Cap.
2000
J J, Drawing
150
Del. Fees
2150
(c)
Wages Exp.
650 50
Rent Exp.
200
Sup. Exp
(a) 60
Tel. Exp 50
Ins. Exp.
(b) 25
Depr. Exp.
(d)
100
5950
5950
235
235

59. Adjusted Trial Balance Balances!!!!
ACCOUNT TITLE
TRIAL BAL.
ADJUSTMENTS
ADJ. TRIAL BAL.
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 80
(a) 60 20
Ppd. Ins.
Adjusted
Trial Balance
Balances!!!!
200
(b) 25
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
(d)
100
100
Accts. Pay.
1800
1800
Wages Pay
(c) 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
(c)
Wages Exp
650 50
700
Rent Exp.
200
200
Sup. Exp.
(a) 60 60
Tel. Exp. 50 50
Ins. Exp.
(b) 25 25
Depr. Exp.
(d)
100
100
5950
5950
235
235
6100
6100

60. Step # 4: Extend Adjusted Balances to the Income Statement and
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
Accts. Rec.
650
Supplies 20
Ppd. Ins.
175
Del. Eq.
3600
A. D.-Del. Eq.
100
Accts. Pay.
1800
Step # 4: Extend Adjusted Balances
to the Income Statement and
Balance Sheet columns.
Wages Pay 50
J J, Cap.
2000
J J, Drawing
150
Del. Fees
2150
Wages Exp
700
Rent Exp
200
Sup. Exp. 60
Tel. Exp. 50
Ins. Exp 25
Depr. Exp.
100
6100
6100

61. Adjusted Trial Balance is extended to either the
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
Accts. Rec.
650
Supplies 20
Ppd. Ins.
175
Del. Eq.
3600
A. D.-Del. Eq.
100
Accts. Pay.
1800
Each account in the
Adjusted Trial Balance
is extended to either the
Income Statement columns
or the Balance Sheet columns,
but not both.
Wages Pay 50
J J, Cap
2000
J J, Drawing
150
Del. Fees
2150
Wages Exp
700
Rent Exp
200
Sup. Exp 60
Tel. Exp. 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

62. Income Statement columns include all accounts found on the
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
Accts. Rec.
650
Supplies 20
Ppd. Ins.
175
Del. Eq.
3600
A. D.-Del. Eq.
100
Accts. Pay.
1800
Income Statement columns include
all accounts found on the
Income Statement….
REVENUES & EXPENSES
Wages Pay 50
J J, Cap.
2000
J J, Drawing
150
Del. Fees
2150
Wages Exp
700
Rent Exp
200
Sup. Exp 60
Tel. Exp. 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

63. Balance Sheet columns include the remaining accounts…..
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
Accts. Rec.
650
Supplies 20
Ppd. Ins.
175
Del. Eq.
3600
A. D.-Del. Eq.
100
Accts. Pay.
1800
Balance Sheet columns include
the remaining accounts…..
ASSETS, LIABILITIES,
CAPITAL & DRAWING
Wages Pay 50
J J, Cap.
2000
J J, Drawing
150
Del. Fees
2150
Wages Exp
700
Rent Exp
200
Sup. Exp 60
Tel. Exp. 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

64. ASSETS ACCOUNT TITLE ADJ. T. B. INCOME STMT BALANCE SHEET DR. CR. DR.
Cash
370
ASSETS
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
Accts. Pay.
1800
Wages Pay. 50
J J, Cap.
2000
J J, Drawing
150
Del. Fees
2150
Wages Exp.
700
Rent Exp.
200
Sup. Exp. 60
Tel. Exp. 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

65. CONTRA - ASSET ACCOUNT TITLE ADJ. T. B. INCOME STMT BALANCE SHEET DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
CONTRA - ASSET
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
Wages Pay. 50
J J, Cap.
2000
J J, Drawing
150
Del. Fees
2150
Wages Exp.
700
Rent Exp.
200
Sup. Exp. 60
Tel. Exp. 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

66. LIABILITIES ACCOUNT TITLE ADJ. T. B. INCOME STMT BALANCE SHEET DR. CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
LIABILITIES
Accts. Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
J J, Drawing
150
Del. Fees
2150
Wages Exp.
700
Rent Exp.
200
Sup. Exp. 60
Tel. Exp. 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

67. CAPITAL ACCOUNT TITLE ADJ. T. B. INCOME STMT BALANCE SHEET DR. CR. DR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
CAPITAL
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
Del. Fees
2150
Wages Exp.
700
Rent Exp.
200
Sup. Exp. 60
Tel. Exp. 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

68. DRAWING ACCOUNT TITLE ADJ. T. B. INCOME STMT BALANCE SHEET DR. CR. DR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts Pay.
1800
1800
Wages Pay. 50 50
DRAWING
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
Wages Exp.
700
Rent Exp.
200
Sup. Exp. 60
Tel. Exp 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

69. REVENUE ACCOUNT TITLE ADJ. T. B. INCOME STMT BALANCE SHEET DR. CR. DR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
REVENUE
150
150
Del. Fees
2150
2150
Wages Exp.
700
Rent Exp.
200
Sup. Exp. 60
Tel. Exp. 50
Ins. Exp. 25
Depr. Exp.
100
6100
6100

70. EXPENSES ACCOUNT TITLE ADJ. T. B. INCOME STMT BALANCE SHEET DR. CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
EXPENSES
Wages Exp.
700
700
Rent Exp.
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100

71. Step#5: Complete the Work Sheet. a. Rule and Total Income Statement
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Step#5: Complete the Work Sheet.
a. Rule and Total Income Statement
and Balance Sheet columns.
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del Eq.
100
100
Accts Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
Wages Exp
700
700
Rent Exp.
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100

72. ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
Wages Exp.
700
700
Rent Exp.
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100
1135
2150
4965
3950

73. Step #5: Complete the Work Sheet. b. Calculate the difference
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies
Step #5: Complete the Work Sheet.
b. Calculate the difference
between the Income
Statement Debit and
Credit columns.
$2,150 - $1,135 = $1,015 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
Wages Pay 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
Wages Exp.
700
700
Rent Exp.
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100
1135
2150
4965
3950

74. Step #5: Complete the Work Sheet. c. Calculate the difference
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies
Step #5: Complete the Work Sheet.
c. Calculate the difference
between the Balance
Sheet Debit and
Credit columns.
$4,965 - $3,950 = $1,015 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
Wages Exp.
700
700
Rent Exp.
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100
1135
2150
4965
3950

75. The differences are the same!!!! The work sheet balances!!!
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies
The differences are the same!!!!
The work sheet balances!!!
Since Income Statement credit
column (REVENUES) exceeds
the Income Statement debit
column (EXPENSES), the
difference is called NET INCOME. 20 20
Ppd. Ins.
175
175
Del. Eq
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
Wages Exp
700
700
Rent Exp.
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100
1135
2150
4965
3950

76. Step #5: Complete the Work Sheet. d. Add the Net Income to the
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies
Step #5: Complete the Work Sheet.
d. Add the Net Income to the
Income Statement Debit and
the Balance Sheet credit column
(columns with smallest totals). 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
Wages Exp.
700
700
Rent Exp.
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100
1135
2150
4965
3950

77. Step #5: Complete the Work Sheet.
ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies
Step #5: Complete the Work Sheet.
e. Total and double rule
(underline) the
columns. 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
Wages Exp.
700
700
Rent Exp
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100
1135
2150
4965
3950
Net Income
1015
1015

78. ACCOUNT TITLE
ADJ. T. B.
INCOME STMT
BALANCE SHEET
DR.
CR.
DR.
CR.
DR.
CR.
Cash
370
370
Accts. Rec.
650
650
Supplies 20 20
Ppd. Ins.
175
175
Del. Eq.
3600
3600
A. D.-Del. Eq.
100
100
Accts. Pay.
1800
1800
Wages Pay. 50 50
J J, Cap.
2000
2000
J J, Drawing
150
150
Del. Fees
2150
2150
Wages Exp.
700
700
Rent Exp.
200
200
Sup. Exp. 60 60
Tel. Exp. 50 50
Ins. Exp. 25 25
Depr. Exp.
100
100
6100
6100
1135
2150
4965
3950
1015
1015
2150
2150
4965
4965

79. FINDING ERRORS ON THE WORK SHEET
If any of the columns on the work sheet do not balance, you must find the error before you continue.

80. FOUR TIPS FOR FINDING ERRORS ON THE WORK SHEET
Check the addition of all columns.
Check the addition and subtraction required when extending to the Adjusted Trial Balance columns.
Make sure the adjusted account balances have been extended to the appropriate columns.
Make sure that the net income or net loss has been added to the appropriate columns.

81. JOURNALIZING ADJUSTING ENTRIES
The work sheet helps the accountant organize the end of period financial information, including adjusting entries.
But, the accounts are not adjusted until a General Journal entry is made and posted to the General Ledger accounts.

82. GENERAL JOURNAL Adjusting Entries Instead of an explanation after
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Adjusting Entries 2 3 4
Instead of an explanation after
each adjusting entry,
“Adjusting Entries” is
written before the first
adjusting entry. 5 6 7 8 9 10 11

83. Each adjusting entry is dated the last day of the accounting
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Adjusting Entries
2000 2
June 30 3 4
Each adjusting entry is dated
the last day of the accounting
period. 5 6 7 8 9 10 11

84. GENERAL JOURNAL Adjusting Entries DATE DESCRIPTION DEBIT PR CREDIT 1
2000 2
June 30
Supplies Expense
60 00 3
Supplies
60 00 4 5 30
Insurance Expense
25 00 6
Prepaid Insurance
25 00 7 8 30
Wages Expense
50 00 9
Wages Payable
50 00 10 11

85. Adjusting Entries (cont.)
GENERAL JOURNAL page 2
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Adjusting Entries (cont.)
2000 2
June 30
Depr. Expense - Delivery Equip.
25 00 3
Accum. Depr. - Del. Equip.
25 00 4 5 6 7 8 9 10 11

86. FOUR-COLUMN ACCOUNT 523 Supplies Expense Posting adjusting entries is
Account No.
Account:
BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
2000
June 30
Adjusting
Posting adjusting entries is
the same as posting other entries
except “Adjusting” is written
in the item area.

87. FOUR-COLUMN ACCOUNT 523 Supplies Expense Account No. Account: BALANCE
DATE
ITEM PR
DR.
CR.
DR.
CR.
2000
June 30
Adjusting 60 60