FA MODULE 7: THE WORKSHEET

LECTURE 1: The Worksheet

At the end of the accounting period, the worksheet is prepared to
facilitate the preparation of the financial statements. The worksheet is an
accounting device or tool, not an accounting report.
It contains the account titles and five pairs of debit and credit money
columns for:
1. trial balance (unadjusted)
2. adjustments
3. adjusted trial balance
4. income statement; and,
5. balance sheet
The account titles are shown in the order that they appear in the chart of
accounts, i.e., assets, liabilities, owner’s equity, revenues, costs, and
expenses.

Trial Balance Money Colums

1. Trial Balance Columns
 The first pair of money columns shows the trial balance and
serves as the beginning balance used in the worksheet.
2. Adjustments Columns
 The second pair of money columns show the adjustments or
adjusting entries that affect accounts that need to be adjusted
at the end of the accounting period. Adjustments must be
made for some accounts because the balances of these
accounts will be overstated or understated if the adjustments
are not made.
3. Adjusted Trial Balance Columns
 The third pair of money columns shows the adjusted trial
balance, which reflects the accurate balances of the accounts,
with the effect of adjustments already effected in the balances.
In the adjusted trial balance money columns, the accounts
affected by the adjustments will show a different balance from
the trial balance amount, whereas accounts not affected by the
adjustments will show the same balance as the trial balance
amount because the trial balance amounts are simply
extended or copied to the appropriate column in the adjusted
trial balance. The total debit and total credit must equal for
the trial balance, adjustments and the adjusted trial balance,
the first three pairs of money columns.
4. Income Statement Columns
 The fourth pair of money columns shows the balance of
income statement accounts. The balances of revenues, costs,
and expenses in the adjusted trial balance are simply extended
or copied to the income statement column. The total debit and
total credit in the income statement column are not equal. The
difference between the debit total and credit total is the result
of operations for the period. If the total debit is larger than the
total credit, the difference is the net loss of the business and if
the total credit is larger than the total debit, the difference is
the net income for the period.

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FA MODULE 7: THE WORKSHEET
5. Balance Sheet Columns
 The fifth pair of money columns shows the balance of balance
sheet accounts. The balances of assets, liabilities, and equity
accounts are copied to the balance sheet column. Just like in
the income statement column, the total debit and total credit
in the balance sheet column are not equal. The 9 difference
between the total debit and total credit in the balance sheet
column must equal the difference between the total debit and
total credit in the income statement column. This difference
must be added to the column with the smaller amount for
both the income statement and balance sheet columns, and
when this difference (net income or net loss) is added to the
column with the smaller amount then the debit total and
credit total for the income statement and balance sheet
columns will equal. It is only after adding the net income or
net loss to the money columns with smaller amount that the
total debit and total credit of the income statement and
balance sheet will equal.
LECTURE 2: Preparing the Worksheet
Many students get confused and find it difficult to prepare the
worksheet. As a matter of fact, worksheet preparation is mostly a process of
transferring or copying information from one column to another. The most
common mistake that students commit is to copy an amount to the wrong
column; copy from debit column to credit column, and vice-versa. For
instance, if the cash amount in the adjusted trial balance is on the debit
side, it should be transferred to the debit side of the balance sheet.
A student should be careful in preparing the worksheet because he cannot
balance the columns if the amounts are extended or copied to the wrong
columns. If the amount is on the debit side of the source column, the
amount must be copied to the debit side of the destination column. If the
amount is on the credit side of the source column, the amount must be
copied to the credit side of the destination column.