Using a worksheet

As indicated in Chapter 4, a worksheet enables companies to prepare financial statements before

journalizing and posting adjusting entries. The steps in preparing a worksheet for a merchandising
company are the same as they are for a service company. So now, let’s get used to this.

Trial Balance Columns

1.Data from the trial balance are obtained from the ledger balances of PW Audio Supply at December 31.

2.The amount shown for Inventory, $36,000, is the year-end inventory amount which results from the
application of a perpetual inventory system.

Adjustments Columns

1.A merchandising company usually has the same types of adjustments as a service company.

2.Worksheet adjustment a, b and c are for insurance, depreciation, salaries and wages.

Adjusted Trial Balance – The adjusted trial balance shows the balance of all accounts after
adjustment at the end of the accounting period.

Income Statement Columns

1.The accounts and balances that affect the income statement are transferred from the adjusted trial
balance columns to the income statement columns for PW Audio Supply at December 31.

2.All of the amounts in the income statement credit column should be totaled and compared to the total of
the amounts in the income statement debit column.

(Đưa hình Illustration 5B.5)

Statement of Financial Position Columns

1.The major difference between the balance sheets of a service company and a merchandising company is
inventory.

2.For PW Audio Supply, the ending Merchandise Inventory amount of $40,000 is shown in the balance
sheet debit column

3. The information to prepare the owner’s equity statement is also found in these columns.

4.Net income results when the total of the debit column exceeds the total of the credit column in the

statement of financial position columns. A net loss results when the total of the credits exceeds the total
of the debit balances.