1. Worksheet for a Service Business
Chapter 7
Worksheet for a Service Business

2. Consistent Reporting
General Ledger accounts contain info needed by managers and owners
before if can be used, it must be analyzed, summarized & reported
When the same accounting procedures are used in the same way it is called Consistent Reporting

3. 7.1 Creating a Worksheet
Fiscal Periods- length of time for which a business summarized and reports financial information (accounting time period)
Many businesses use a 1-year fiscal period (because of federal and state tax reports once a year)
Encore uses a 1 month period (starting August 1)

4. 7.1-Worksheet
Work Sheet- a columnar accounting form used to summarize the general ledger information needed to prepare financial statements
Used for four reasons:
Summarize general ledger account balances to prove debits=credits
To plan needed changes to bring account balances up to date
Separate general ledger account balances
Calculate net income/net loss in fiscal period

5. 7.1 Preparing Worksheet Heading
Name of Company
Name of Report (Worksheet)
Date of Report (For Year Ended)

6. 7.1 Preparing a Trial Balance on a Worksheet
Trial Balance- the totals of all debit and credit account balances shown in a proof of equality
This information is taken from general ledger balances
Account titles are listed in the same order as the Chart of Accounts

7. 7.1 Preparing a Trial Balance Steps
Write the general ledger account titles
Write the general ledger debit account balances in Trial Balance Debit Column. Write the general ledger credit account balances in Trial Balance Credit Column. Leave a blank space if there is no balance
Rule a single line across the two Trial Balance columns below the last line. (Show these columns need to be totaled)
Add both Trial Balance Debit and Credit columns. (If they don’t =, recheck general ledger balances and math)
Write totals below single line
Rule double lines

8. 7.1 Review Terms Review Audit Your Understanding #1-2 Work Together #3
On Your Own #4

9. 7.2 Planning Adjusting Entries on Worksheet
Please read page 154
Adjustments- changes recorded on a work sheet to update general ledger accounts at the end of fiscal period

10. 7.2 Supplies Adjustment
Write the debit amount in the work sheet’s Adjustment Debit column: Supplies Expense
Write the credit amount in the Adjustment Credit column: Supplies
Label the two parts of the adjustment with a small letter (a)-identifies to parts of the same adjustment

11. 7.2 Prepaid Insurance Adjustment
On August 31, Ms. Trevino checked the insurance records and found that the value of insurance coverage remaining was $1, (used in period).
How can this be shown in the work sheet as an adjustment?

12. 7.1 Proving the Adjustments Column of a Work Sheet
After all adjustments are recorded in a work sheet’s Adjustments column, the equality of debits and credits for the two columns is proved by totaling and ruling the two columns

13. 7.2 Review Terms Review Audit Your Understanding #1-2
Work Together #3-4
On Your Own #5-6

14. 7.3 Extending Financial Statement Information on a Work Sheet
Extending Balance Sheet Account Balances on a Work Sheet
Show balances from the Balance Sheet on the Work Sheet
See page 159

15. Extending Account Balances
Extend the balance of each account to Debit Column (without adjustments)
Calculate up-to-date Adjusted Balances
Extend the balance of each account to Credit Column (without adjustments)

16. Extending Income Statement Balances
Income Statement- a financial statement showing the revenue and expenses for a fiscal period
Extend Sales account to Credit Column
Extend Expenses without Adjustments
Extend Expenses with Adjustments

17. Recording Net Income AND Totaling
Net Income- difference between total revenue and total expenses; when revenue is greater
Rule a single line across Income and Balance
Total Income and Balance Sheet Columns
Calculate Net Income (write Net Income)
Rule a single line below the Net Inc Amts
Add subtotal and net income for each column
Write proving totals and Rule a double line

18. Preparation Summary
Between page 160 and 161

19. 7.3 Review: p. 163 Terms Review Audit Your Understanding #1-4
Work Together #5-7
On Your Own # 8-10

20. 7.4 Finding and Correcting Errors
CALCULATION ERRORS- When two columns are not in Balance
if difference is 1 like $.01, $.10, $1.00
check Addition
if difference is divisible by 2
check for correct recording
if difference is divisible by 9
check for transposed numbers
LOOK for OMITTED Amounts

21. Correcting An Incorrect Amount- Draw a line through incorrect amount
Write correct amount
Recalculate Balances and correct
Posting to the wrong column-
Draw a line through incorrect item
Record posting in correct column
Recalculate balance

22. Errors, cont. Checking General Journal- Do Debits = Credits?
Is each general journal entry amount recorded in correct column?
Is info in Account Title Correct for each entry?
Are all transactions recorded?
WORK CAREFULLY TO PREVENT ERROR

23. 7.4 Review- p. 167 Audit Your Understanding #1-4 Work Together # 4-6
On Your Own # 7-9