1. WORKSHEET

2. STEP 1: WRITE THE HEADING  WHO  WHAT  WHEN  ACROSS THE TOP OF THE WORKSHEET

3. STEP 2: RECORD THE TRIAL BALANCE  RECORD THE TITLES AND BALANCES FROM ALL THE GENERAL LEDGER ACCOUNTS ON THE WORK SHEET. ADD THE DEBIT COLUMN BALANCES AND THE CREDIT COLUMN BALANCES. THE DEBIT AND CREDIT COLUMNS SHOULD SHOW THE SAME TOTALS.

4. STEP 3:TRANSFER THE BALANCE SHEET ITEMS  TRANSFER ALL ASSETS, LIABILITIES, AND OWNER’S EQUITY TO THE RIGHT COLUMNS. (DEBIT/CREDIT).

5. STEP 4: TRANSFER THE INCOME STMT ITEMS  TRANSFER ALL REVENUE AND EXPENSE ITEMS ACCORDING TO DEBIT/CREDIT

6. STEP 5:COMPLETE THE INCOMES STMT SECTION  This section shows the net income or net loss as determined by your revenues and expenses.  A single line below your debit and credit columns. Add you totals to get the amounts.  Determine the difference between the 2 columns  Write the difference between the smaller side.  If revenues exceeds expenses, you have net income. If expenses exceeds revenue you have loss

7.  Net income….represents an increase to owner’s equity  Net loss….represents a decrease to owner’s equity

8. Classified Balance Sheet Assets and Liabilities Assets are divided into two groups: I. Current II. Fixed Liabilities are divided into two groups: I. Current II. Long term

9. Current Assets  Cash and other assets that are converted into cash, sold, and/or consumed within one year.  They are listed in the order of liquidity. ex. 1. Cash 2. Bonds (easily converted) 3. Securities (easily converted) 4. Accounts Receivable (30 days) 5. Pre-Paid Expenses

10. Prepaid Expenses  Expense payments made in advance ex. Prepaid insurance Prepaid rent

11. Fixed Assets  Assets that are used in the operating of businesses, and have a long life in excess of one year. ex. Land, building, equipment, and trucks,  They could also be listed in the balance sheet as “plant and equipment”, and “capital assets”.  The fixed assets that have the longest life are listed first. ex Land Building Equipment Delivery trucks

12. Current Liabilities  Liabilities that have to paid in one year or less  They are listed in order to be paid ex. Accounts Payable Taxes Payable Salaries Payable Loans Payable

13. Long Term liabilities  Liabilities that are not due to be paid for more than one year ex. Bank loan, Mortgage Payable, Car loan

14. Supporting Statements and Schedules  Statement of Owner’s Equity provides the owner of a business with data regarding the change in value of his or her equity from an accounting period. Capital (+)(-) Income (-) Drawings Increase/decrease in capital ========================== End of the month capital

15. Supporting Schedule  Schedule of Accounts Receivable Shows a list of Accounts Receivable and the amounts that they owe to your Company  Schedule of Accounts Payable Shows a list of Accounts Payable and the amounts that you owe to other companies.