1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 4-3 Preparing a Work Sheet for a Departmentalized Business Modified by D. Burns West Johnston High School

2. CENTURY 21 ACCOUNTING © Thomson/South-WesternModified by D. Burns West Johnston High School PROVING THE ACCURACY OF POSTING TO SUBSIDIARY LEDGERS page 99  A list of customer accounts, account balances, & total amount due from al customers is called a schedule of accounts receivable A list of vendor accounts, account balances, & total amount due all vendors is called a schedule of accounts payable

3. CENTURY 21 ACCOUNTING © Thomson/South-Western EXPANDED WORK SHEET Modified by D. Burns West Johnston High School A columnar accounting form used to summarize the general ledger information needed to prepare financial statements is called a work sheet. A proof of the equality of debits & credits in a general ledger is called a trial balance. Should always be prepared as part of the end-of- fiscal-period activities Prepared in the Trial Balance columns of the work sheet

4. CENTURY 21 ACCOUNTING © Thomson/South-Western TRIAL BALANCE COLUMNS Modified by D. Burns West Johnston High School Accounts are listed in the Account Title column in the same order in which they appear in the general ledger. All accounts are listed, regardless of whether there is a balance or not In a departmental work sheet there is an income summary account for each department and a general income summary. Income Summary – Audio Income Summary – Video Income Summary – General After all general ledger accounts & balances have been entered, the Trial Balance columns are totaled, checked for equality, & ruled

5. CENTURY 21 ACCOUNTING © Thomson/South-Western ADJUSTMENTS ON A WORK SHEET WITH DEPARTMENTAL MARGINS Modified by D. Burns West Johnston High School At the end of the fiscal period general ledger accounts need to be brought up to date. Entries needed to bring accounts up to date are planned in the Adjustments columns of the work sheet Departmental merchandise inventory adjustments are recorded in each department’s appropriate income summary account Adjustments are also made for: Uncollectible Accounts expense Supplies Used Insurance Expired Depreciation Estimated Federal Income Tax Expense

6. CENTURY 21 ACCOUNTING © Thomson/South-Western ADJUSTMENTS ON A WORK SHEET WITH DEPARTMENTAL MARGINS Modified by D. Burns West Johnston High School Each department also has a Departmental Margin account listed below the expense accounts Below the Departmental Margin account the Federal Income Tax Expense account is listed This simplifies subtotaling the income statement columns & calculating additional income tax expense

7. CENTURY 21 ACCOUNTING © Thomson/South-WesternModified by D. Burns West Johnston High School pages 102-103 DEPARTMENTAL WORK SHEET Trial Balance Adjustments Departmental Income Summary Accts.

8. CENTURY 21 ACCOUNTING © Thomson/South-WesternModified by D. Burns West Johnston High School DEPARTMENTAL WORK SHEET pages 102-103 Departmental Margin Accts.

9. CENTURY 21 ACCOUNTING © Thomson/South-WesternModified by D. Burns West Johnston High School ADJUSTMENTS SHOWN ON WORK SHEET Percentage Total Sales on Account Estimated Uncollectible Accounts Expense × = $210,940.00× = $2,109.40 1% page 104  Uncollectible Accounts Expense Adjustment  When business use the Allowance Method to determine Uncollectible accounts the adjustment on the worksheet will be the percentage determined to be uncollectible Uncollectible Accounts Expense $2,109.40 Allowance for Uncollectible Accounts $2,109.40

10. CENTURY 21 ACCOUNTING © Thomson/South-Western ADJUSTMENTS SHOWN ON WORK SHEET - MERCHANDISE INVENTORY Modified by D. Burns West Johnston High School  The merchandise inventory account balances in the trial balance are the beginning inventory amounts for a fiscal period.  The amount of the ending inventory can be determined by taking a periodic inventory, perpetual inventory, or other methods.  The inventory adjustment is made through the department’s Income Summary account If the ending inventory is HIGHER than beginning inventory: Merchandise Inventory - Audio $18,420.39 Income Summary – Audio $18,420.39 If the ending inventory is LOWER than beginning inventory: Income Summary – Audio $9,360.00 Merchandise Inventory – Audio $9,360.00

11. CENTURY 21 ACCOUNTING © Thomson/South-Western ADJUSTMENTS SHOWN ON WORK SHEET - SUPPLIES Modified by D. Burns West Johnston High School  The Supplies Account balance in a trial balance includes two items:  The account balance on January 1  The cost of supplies bought during the year  Supplies are counted at the end of the fiscal period to determine the adjustment needed  Separate asset and expense accounts are maintained for each department Supplies Expense - Administrative $2,922.00 Supplies – Administrative $2,922.00

12. CENTURY 21 ACCOUNTING © Thomson/South-Western ADJUSTMENTS SHOWN ON WORK SHEET - INSURANCE Modified by D. Burns West Johnston High School  The Prepaid Insurance account balance includes:  The account balance on January 1  The amount of insurance premiums paid during the year  The balance does not reflect the amount of insurance used during the year. The amount of unexpired insurance is determined at the end of a fiscal period Insurance Expense $5,650.00 Prepaid Insurance $5,650.00

13. CENTURY 21 ACCOUNTING © Thomson/South-Western ADJUSTMENTS SHOWN ON WORK SHEET - DEPRECIATION Modified by D. Burns West Johnston High School  Assets that will be used for a number of years in the operation of a business are called plant assets  The portion of a plant asset’s cost that is transferred to an expense account in each fiscal period during a plant asset’s useful life is called depreciation expense Depreciation Expense-Office Equip. $852.07 Accum. Depreciation-Office Equip. $852.07

14. CENTURY 21 ACCOUNTING © Thomson/South-Western ADJUSTMENTS SHOWN ON WORK SHEET - FEDERAL INCOME TAX EXPENSE Modified by D. Burns West Johnston High School  An adjustment must be made at the end of the fiscal period to record the actual Federal Income Tax liability for the year.  The adjustment if figured:  Actual income tax liability – Balance in Federal Income Tax payable = Adjustment Federal Income Tax Expense $852.07 Federal Income Tax Payable $852.07

15. CENTURY 21 ACCOUNTING © Thomson/South-Western COMPLETING A WORK SHEET WITH DEPARTMENTAL MARGIN COLUMNS Modified by D. Burns West Johnston High School 1.Extend the asset, liability, & stockholders’ equity account balances to the Balance Sheet columns 2.Extend the up-to date balances of the income summary accountsto the Departmental Margin columns

16. CENTURY 21 ACCOUNTING © Thomson/South-Western COMPLETING A WORK SHEET WITH DEPARTMENTAL MARGIN COLUMNS Modified by D. Burns West Johnston High School 3. Extend the up-to date balances of the revenue, cost, & direct expense accounts for the departments to the Departmental Margin 4. Extend the indirect expense items to the Income Statement Debit column 5. Calculate the departmental margin for each department 6. Extend the adjusted balance of federal income tax expense amount to the Income Statement debit column

17. CENTURY 21 ACCOUNTING © Thomson/South-WesternModified by D. Burns West Johnston High School 2. Write department loss in Income Statement Debit column. 1. Write department loss in Departmental Margin Statement Credit column. DEPARTMENTAL AND COMPANY LOSS ON A WORK SHEET 5 page 109 1234 3. Record company loss in Income Statement Credit column. 4. Record company loss in Balance Sheet Debit column. 5. Add description.

18. CENTURY 21 ACCOUNTING © Thomson/South-Western COMPLETING A WORK SHEET WITH DEPARTMENTAL MARGIN COLUMNS Modified by D. Burns West Johnston High School 7. Total the Income Statement & Balance Sheet columns calculate & record net income after federal income tax. 8. The difference between the two Income Statement column totals on the work sheet is the net income or net loss for a fiscal period. The difference between the two balance sheet columns also represents the net income or net loss. 9. After the net income amount is written in the two work sheet columns, the last four columns are totaled again

19. CENTURY 21 ACCOUNTING © Thomson/South-WesternModified by D. Burns West Johnston High School TERMS REVIEW schedule of accounts receivable schedule of accounts payable work sheet trial balance plant assets depreciation expense page 110