Worksheet

Steps in the Preparation of Worksheet

1. Enter the account balances in the Unadjusted Trial Balance columns
and total the amounts.
a. The unadjusted trial balance is prepared from the balances of the
ledger accounts at the end of the accounting period.
b. Total debits must equal total credits.
c. Accounts with zero balances are also presented.
d. Listing all accounts with their balances helps identify the accounts
that need adjustments.
Steps in the Preparation of Worksheet
2. Enter the adjusting entries in the adjustments columns and total
the amounts.
a. All adjustments are first entered in the worksheet.
b. As each adjustment is entered, a letter is used to identify the debit
entry and the corresponding credit entry.
c. Note that the adjustments are not journalized until after the
worksheet is completed and the financial statements prepared.
Steps in the Preparation of Worksheet
3. Compute each account’s adjusted balance by combining the unadjusted
trial balance and the adjustment figures. Enter the adjusted amounts in
the adjusted trial balance columns.
a. Amounts are entered in the adjusted trial balance columns by combining
horizontally, line by line, the amount of each account in the unadjusted
trial balance columns with the corresponding amount in the adjustments
columns
b. Add when the type of adjustment (debit or credit) is the same as the
unadjusted balance.
c. Subtract when the type of adjustment (debit or credit) is different from
the unadjusted balance.
d. The adjusted trial balance columns are totaled to check the accuracy of
the procedure.
Steps in the Preparation of Worksheet
4. Extend the asset, liability and owner’s equity amounts from the adjusted trial
balance columns to the balance sheet columns. Extend the income and
expense amounts to the income statement columns. Total the statement
columns.
a. Every account is either a balance sheet account or an income statement
account.
b. Debits in the adjusted trial balance remains as debits in the statement columns
while credits as credits.
c. The merchandise inventory, beginning is extended to the debit column of the
income statement.
d. The merchandise inventory, ending is entered in the credit column of the
income statement and debit column of the balance sheet.
e. The initial totals of the income statement and balance sheet columns are not
equal.
Steps in the Preparation of Worksheet
5. Compute the profit or loss as the difference between total revenues and
total expenses in the income statement. Enter profit or loss as a
balancing amount in the income statement and in the balance sheet, and
compute the final column totals.
a. Profit or loss is equal to the difference between the debit and credit
columns of the income statement.
b. The profit or loss should always be the amount by which the debit and
credit columns for income statement, and the debit and credit columns
for balance sheet differ.
c. The profit figure is extended to the credit column of the balance sheet,
and in the debit column of the income statement.
d. After completion, the total debits and credits in the income statement
and balance sheet must equal.