Unit 12 – Worksheet, Adjustments, Financial Statements

Eight-Column Worksheet

• -how adjustments are first prepared on the worksheet (same way as 6 – column) …just need to add 2 columns for adjustments.

• In the following order:– Trial Balance– Adjustments– Income Statement– Balance sheet

Eight-Column Work Sheet

• SEE FIGURE 6.5 (Page 221)

Adjustment #1 (Supplies)

• A count made of all supplies on hand shows $900 worth left on January 31.

• See Figure 6.6 – Page 223

Total supplies purchasedLess: Supplies leftSupplies used

$1000 900 $100

Supplies

Jan.31 1000Balance 900

Jan. 31 100

Supplies Expense

Jan. 31 100

Adjustment #2 (Prepaid Insurance)

• In January, a $720, one year insurance policy was purchased. One month of the policy is now expired.

• See Figure 6.7 – Page 225

Insurance for 1 yearPer month (1/12 * 720)

$720 $60

Prepaid Insurance

Jan.31 720Balance 660

Jan. 31 60

Insurance Expense

Jan. 31 60

Adjustment #3 (Prepaid rent)

• On January 1st, rent of $5100 was prepaid for January, February, & March.

• See Figure 6.8 – Page 226

Rent for 3 monthsPer month (1/3 * 5100)

$5100 $1700

Prepaid Rent

Jan.31 5 100Balance 3 400

Jan. 31 1 700

Rent Expense

Jan. 31 1 700

Adjustment #4 (Depreciation-Equipment)

• 20% per year (Declining Balance method – tax purposes)

• See Figure 6.9 – Page 227

This year’s depreciationPer month (1/12 * 1920)

$1920 $160

Accumulated Depreciation-Equipment

Jan. 31 2400 31 160Balance 2560

Depreciation Expense-Equipment

Jan. 31 160

Equipment

Jan. 31 12 000

Completing the Worksheet

• See Page 227.– Add or subtract the adjustment to create your

new total for the account. (balance sheet or income statement)

• Net income/loss calculated the same way as before. (Debits > Credits = net loss and vice versa)

- Double underline totals!

8-Column Worksheet (Steps)

1. Heading2. Trial Balance3. Data for adjustments (collect)4. Adjustments column (total, balance, rule)5. Transfer to income statement or balance

sheet6. Determine Net income/loss7. Balance & rule the work sheet.

10 – Column Worksheet

• Two extra columns added (Adjusted Trial Balance)– Purpose: to ensure ledger accounts still in balance

• See Figure 6.10 (Page 230)

10-Column Worksheet (Steps)

1. Heading2. Trial Balance3. Data for adjustments (collect)4. Adjustments column (total, balance, rule)5. Transfer to adjusted trial balance. (recalculate

balances where necessary)6. Transfer to income statement or balance sheet7. Determine Net income/loss8. Balance & rule the work sheet.

Preparing the Financial Statements

• Financial statements are prepared from the work sheet. (Page 231-232)

• New Expenses (from adjustments) are included in the income statement.

• Accumulated Depreciation is shown as a subtraction from Equipment in the fixed asset section of the balance sheet.