1.4 Review – The Worksheet
Often companies prepare a worksheet to summarize the financial statements. The worksheet is an “at-a-glance” snapshot of the general ledger as well as adjusting entries. The worksheet must always be in balance. It can be used as a check point before completing the financial statements. Once the worksheet is in balance, it is then used to create financial statements. A worksheet is very helpful for documenting account details and to make notes when preparing financial statements.
The worksheet does not replace the financial statements. Instead, the worksheet is an internal, informal, information tool for accumulating and sorting the information that is needed for the financial statements. Completing the worksheet makes it more certain that all of the details of the end-of-period accounting and statement preparation have been properly brought together. An example of a worksheet:
|
Unadjusted Trial Balance
|
Adjustments
|
Adjusted Trial Balance
|
Income Statement
|
Balance Sheet
|
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Account Name |
Dr.
|
Cr.
|
Dr.
|
Cr.
|
Dr.
|
Cr.
|
Dr.
|
Cr.
|
Dr.
|
Cr.
|
| Cash | 50,000 | 50,000 | 50,000 | |||||||
| Accounts Receivables | 120,000 | 120,000 | 120,000 | |||||||
| Prepaid Rent | 10,000 | 6,000 | 4,000 | 4,000 | ||||||
| Inventory | 32,000 | 32,000 | 32,000 | |||||||
| Land | 500,000 | 500,000 | 500,000 | |||||||
| Building | 400,000 | 400,000 | 400,000 | |||||||
| Building – Accumulated Depreciation | 60,000 | 10,000 | – | 70,000 | – | 70,000 | ||||
| Equipment | 100,000 | 100,000 | 100,000 | |||||||
| Equipment – Accumulated Depreciation | 25,000 | 20,000 | – | 45,000 | – | 45,000 | ||||
| Accounts Payable | 32,000 | – | 32,000 | 32,000 | ||||||
| Sales Tax Payable | 1,500 | – | 1,500 | 1,500 | ||||||
| Bank Loan | 700,000 | – | 700,000 | 700,000 | ||||||
| Common Shares | 100,000 | – | 100,000 | 100,000 | ||||||
| Retained Earnings | 215,500 | – | 215,500 | 215,500 | ||||||
| Revenue | 425,000 | – | 425,000 | 425,000 | ||||||
| Advertising Expense | 15,000 | 15,000 | 15,000 | |||||||
| Depreciation Expense | 30,000 | 30,000 | 30,000 | |||||||
| Rent Expense | 10,000 | 6,000 | 16,000 | 16,000 | ||||||
| Utility Expense | 22,000 | 22,000 | 22,000 | |||||||
| Wages Expense | 300,000 | – | – | – | 300,000 | – | 300,000 | |||
| 1,559,000
|
1,559,000
|
36,000
|
36,000
|
1,589,000
|
|
383,000 | 425,000 | 1,206,000 | 1,164,000 | |
| 42,000 | 42,000 | |||||||||
| 425,000
|
425,000
|
1,206,000
|
1,206,000
|
|||||||
Notes:
- The Unadjusted Trial Balance is created after the day-to-day transactions are completed and posted.
- Adjustments are recorded after the unadjusted trial balance is completed, near the end of the accounting cycle.
- The Adjusted Trial Balance is used to create the financial statements (the Income Statement and Balance Sheet).
