1. Chapter 5 Preparing Financial Statements

2. Topic 1 Introducing the Six-Column Worksheet

3. Steps in the Accounting Cycle 1. Originating Data 2. Journalizing Source Documents 3. Posting Data to the Ledger 4. Preparing a Trial Balance 5. Six-Column Worksheet (NEW) 6. Preparing Financial Statements (NEW)

4. Review Trial Balance – contains a short list of general ledger accounts and their amounts Once the trial balance is complete and correct a lot of accountants will then create a worksheet to assist them in preparing financial statements more easily.

6. Completing the Six-Column Worksheet Step 1  Complete the heading.  The date line always reports the length of the accounting period.  Matching principle (net income or loss is the result of matching revenues with related expenses for a definite period) Step 2  Copy the Trial Balance to the Worksheet  Debits stay as debit and credits stay as credit Step 3  Transfer and separate the balances between the income statement and balance sheet.  The two rules when copying balances from the trial balance to the related financial statement column:  Debit balance to the debit side of related financial statement  Copy credit balance to the credit side of the related financial statement

7. Step 4  Add the financial statement columns.  Draw a single line across all statements columns as shown.  The totals are written below the single line. Step 5 Complete the Income Statement section Since the IS is shown as debit and credit columns, the procedure to prepare an income statement is slightly different.

8. Step 6  Complete the Balance Sheet Section  Copy net income along the same line to thte credit column of the balance sheet.  Single line  Double line = complete