1. Worksheet for a Merchandising Business
Chapter 15
Worksheet for a Merchandising Business

2. OBJECTIVES:
Define accounting terms related to a work sheet for a merchandising business.
Identify accounting concepts and practices related to a work sheet for a merchandising business.
Begin a worksheet for a merchandising business.
Plan adjustments on a work sheet for a merchandising business.
Complete a work sheet for a merchandising business.

3. How Financial Information is Used
Management uses it to make decisions on future business operations.
Needed to prepare tax reports.
Used to obtain additional assets for the business.
Shows profit/loss.
Can be summarized at any time, but MUST BE done at the end of each fiscal period
Omni: begins Jan 1  ends Dec. 31

4. Ch 15-1:
Beginning an 8-Column Work Sheet for a Merchandising Business

5. The Worksheet: Summarizes financial information for a fiscal period
Accounting Period Cycle
Checks the equality of the general ledger- DR=CR
Used in planning adjustments
Determines Net Income or Loss
Sorts accounts for preparation of financial statements
Step 1 - TRIAL BALANCE:
All accounts from general ledger are listed in the order they are in the ledger.
Some accounts will not have a balance (still list them)

6. TRANSFERRING GENERAL LEDGER ACCOUNT BALANCES TO A WORK SHEET
Lesson 15-1 (GJ)
TRANSFERRING GENERAL LEDGER ACCOUNT BALANCES TO A WORK SHEET
RECORDING A TRIAL BALANCE ON A WORK SHEET 1 2
1. Write the titles of the general ledger accounts.
2. Write the balance of each account.
3. Total, prove, and rule the debit and credit columns. 3

7. Purpose of Adjustments
Bring all accounts up to date
Supplies – store
Supplies – office
Pre-paid Insurance
Merchandise Inventory
Why plan adjustments????
The correct income or loss can be determined
The business pays the correct amount in taxes
MATCHING REVENUE WITH EXPENSES

8. Merchandise Inventory
Merchandise Inventory The amount of goods on hand for sale to customers.
New Asset Account – Normal DR balance
No entries are recorded in this account during the fiscal period.
Purchases is used to record merchandise bought and Sales is used to record merchandise sold.
Must adjust Merchandise Inventory to reflect purchases and sales throughout fiscal period
2 ways TO DETERMINE INVENTORY:
Book inventory - determined by general ledger accounts.
Physical inventory - actually count the merchandise.

9. Merchandise Inventory Adjustment
Two accounts used for the adjustment:
Merchandise Inventory
Income Summary
Whether you debit or credit Merchandise Inventory depends on business conditions.
DR – merchandise on hand is GREATER at end of fiscal period (than the beginning)
CR – merchandise on hand is LESS at the end of the fiscal period

10. PLANNING ADJUSTMENTS ON A WORK SHEET
Merchandise Inventory
Debit
Credit
Merchandise Inventory
Jan. 1 Bal. 270,480.00
Dec. 31 Balance - $254,640.00

11. ANALYZING A MERCHANDISE INVENTORY ADJUSTMENT
Lesson 15-1 (GJ)
ANALYZING A MERCHANDISE INVENTORY ADJUSTMENT
AFTER ADJUSTMENT
BEFORE ADJUSTMENT
What is the balance?
What should the balance be?
What must be done to correct the account balance?
What adjustment is made?
Income Summary
Adj. (a) 15,840.00
Merchandise Inventory
Jan 1 Bal. 270,480.00
Jan 1 Bal. 270,480.00
Adj. (a) 15,840.00
(Dec. 31 Bal ,640.00)

12. RECORDING A MERCHANDISE INVENTORY ADJUSTMENT3 2 1
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.

13. PLANNING ADJUSTMENTS ON A WORK SHEET
Merchandise Inventory
Debit
Credit
Merchandise Inventory
Jan. 1 Bal ,700.00
Dec. 31 Balance - $ 298,900.00

14. Merchandise Inventory
ANALYZING AN ADJUSTMENT WHEN ENDING MERCHANDISE INVENTORY IS GREATER THAN BEGINNING MERCHANDISE INVENTORY
AFTER ADJUSTMENT
BEFORE ADJUSTMENT
Merchandise Inventory
Jan 1 Bal. 294,700.00
Adj. (a) 4,200.00
(Dec ,900.00)
Income Summary
Adj. (a) 4,200.00

15. Another example:
Jan. 1 Balance of Merchandise Inventory is $150,000.00
Dec. 31 Physical Inventory count is $180,000.00
What should your adjusting entry be?

16. Debit Merchandise Inventory $30,000.00
Adjusting Entry
Debit Merchandise Inventory $30,000.00
Credit Income Summary $30,000.00

17. What is your adjusting entry?
Jan. 31 Balance of Merchandise Inventory is $250,000.00
Dec. 31 Physical Inventory count is $180,000.00
What is your adjusting entry?

18. TERMS REVIEW inventory merchandise inventory TO DO:
Work Together, pg 379
On your own, pg 379

19. CHAPTER 15-2: Adjusting and Recording Work Sheet Adjustments
Supplies NOT used during fiscal period Assets
Supplies used Supplies Expenses
MATCHING EXPENSES WITH REVENUE
Supplies Balance on Trial Balance is $580
Inventory of Supplies is $430
Adjusting Entry
Debit Supplies Expense $150 – amount used
Credit Supplies $150 – decreases asset

20. ANALYZING A SUPPLIES ADJUSTMENT
Lesson 15-1 (GJ)
ANALYZING A SUPPLIES ADJUSTMENT
AFTER ADJUSTMENT
BEFORE ADJUSTMENT
Supplies Expense—Office
4. Adj. (b) 4,730.00
Supplies—Office
1. Dec. 31 Bal. 6,480.00
Dec. 31 Bal. 6,480.00
4. Adj. (b) 4,730.00
2. (New Bal. 1,750.00)
What is the balance?
What should the balance be?
What must be done to correct the account balance?
What adjustment is made?

21. RECORDING SUPPLIES ADJUSTMENTS3 2 1
1. Write the debit amounts.
2. Write the credit amounts.
Label the two parts of this adjustment.
***What is the new balance of both supplies accounts??

22. ANALYZING A PREPAID INSURANCE ADJUSTMENT
Value of pre-paid insurance NOT used – ASSET
Value of pre-paid insurance USED/expired – EXPENSE
Pre-paid Insurance account does not reflect the value of insurance used during the fiscal period
Must make adjustments

23. ANALYZING A PREPAID INSURANCE ADJUSTMENT
AFTER ADJUSTMENT
BEFORE ADJUSTMENT
Insurance Expense
4. Adj. (d) 3,170.00
Prepaid Insurance
Dec 31 Bal. 5,800.00
1. Dec 31 Bal. 5,800.00
4. Adj. (d) 3,170.00
2. (New Bal. 2,630.00)
What is the balance? (5,800)
What should the balance be? (2,630)
What must be done to correct the account balance?
What adjustment is made?

24. RECORDING A PREPAID INSURANCE ADJUSTMENT3 2 1
1. Write the debit amount.
2. Write the credit amount.
Label the two parts of this adjustment.
**What is the new balance of the prepaid insurance account????

25. TO DO:
Work Together, pg 385
On your own, pg 385
Application 15-1, 15-2

26. Chapter 15-3: Completing a Work Sheet
Same as Encore Music
EXCEPT:
Income Summary increases/decreases amount of goods from purchases/sales extend to Income Statement columns

27. COMPLETING AN 8-COLUMN WORK SHEET
Lesson 15-1 (GJ)
COMPLETING AN 8-COLUMN WORK SHEET 2 1
1. Extend balance sheet items to Balance Sheet columns.
2. Extend income statement items to Income Statement columns.
3. Total Income Statement and Balance Sheet columns.
4. Calculate net income or net loss.
5. Extend net income or net loss to Balance Sheet Debit or Credit column.
6. Total Income Statement and Balance Sheet columns.
7. Check that totals are in balance. 3 4 5 6 7

28. PAGE 388 – Completed Work Sheet
What does each amount on line 4 represent?
Line 5?
Line 6?
Line 7?
Line 22, what is the other half of the adjustment?
Which accounts go to the Balance Sheet columns? To the Income Statement columns?
How was line 36 calculated?
Why is line 36 recorded in Balance Sheet Credit column?

29. 10-column worksheet
Used by larger merchandising businesses with many accounts to be adjusted
Included additional pair of amount columns  Adjusted Trial Balance

30. A 10-COLUMN WORK SHEET FOR A MERCHANDISING BUSINESS (LEFT PAGE)
1. Record the trial balance.
2. Plan the adjustments. 1 2

31. A 10-COLUMN WORK SHEET FOR A MERCHANDISING BUSINESS (RIGHT PAGE)
3. Extend the balances in the Trial Balance columns to the Adjusted Trial Balance columns. 5 3
4. Total, prove, and rule the Adjusted Trial Balance columns.
5. Extend the amounts in the Adjusted Trial Balance columns to the appropriate Income Statement and Balance Sheet columns.
6. Total, prove, and rule the appropriate Income Statement and Balance Sheet columns. 4 6

32. TO DO:
Work Together, pg 392
On your own, pg 392
Application Problem 15-3
Ch. 15 Quiz
Mastery 15-4
Ch. 15 Study Guide
TEST – TOMORROW!