The work sheet is a tool the accountant uses to collect all the information need for the end-of-period activities.
Preparing the work sheet helps you understand the relationship of all ledger accounts and where they are reported.
The balance sheet section contains the “balance sheet” accounts – assets, liability, and owners equity accounts. After the balance sheet has been proved the next step is to extend, or transfer the appropriate amounts to the balance sheet section. Simply, copy the amounts over in the appropriate debit or credit column.
The next step is to extend the appropriate account balances to the Income Statement section. The Income statement section includes the revenue and expense accounts.
After all the amounts in the trial balance section are extended to the Balance Sheet and Income Statement sections, each section is totaled. A single rule is drawn across the four debit and credit columns to indicated the columns are ready to be added. *** Notice the debit and credit column in each section is not equal. The two section will not be equal until the net income or net loss is added.
To complete the Income statement and balance sheet sections: On the line under the net income amount, drwa a single rule across the four columns. D 2. in the income statement section debit column, add the net incoe amount to the previous total and enter the new total. Bring down the total of the income statement section credit amount. Total debits should equal total credits. E 3 in the balance sheet section credit column, add net income to the previous total and enter the new total. Bring down the total of the balance sheet section debit column. The total debit should equal the total credit amount. 4 in the balance sheet and income statement sections draw a double rule under the four column totals. The double rule indicates that the debit and credit columns are equal and no more amounts are to be entered in this column.
The metro system is operated by the Washington Metropolitan Area Transit Authority (WMATA), a not for profit organization. Revenues and expenses are monitored carefully by the managers since revenues must pay the full operating cost of the system.
What do you think?
If you worked for the Washington Metro , what information would you look for in monthly work sheets to alert you to revenue or expense problems.
When total expenses are greater than total revenue, a net loss occurs.
A net loss decreases owner equity.
This decrease is shown a a debit to the capital account
The steps to complete the work sheet is the same except Net Loss is the Account Name and the loss in enter in the credit column of the income statement and the debit column of the balance sheet section.
A review of the Steps in Preparing a Six-Column Work Sheet
Write the heading on the work sheet.
In the Account Name and Trial Balance sections, enter the account numbers, names, and balances for all accounts in the general ledger.
Prove the equality of total debits and total credits in the trial balance section.
Extend the amounts of the Trial Balance section to the appropriate columns for Balance Sheet and Income Statement Sections
A review of the Steps in Preparing a Six-Column Work Sheet (cont.)
Total the columns in the Income Statement and Balance Sheet sections.
Determine the amount of the net income or the net loss for the period.
Enter the amount of the net income or net loss in the appropriate column in the Income Statement and Balance Sheet sections.
Total and rule the Income Statement and Balance Sheet sections.
Imagine that you’re an auditor for an accounting firm like PricewaterhouseCoopers. You and a co-worker, Mark, have an allowance of $200 a day to cover lodging, meals, and transportation. At the end of the trip, you are to turn in an expense account report detailing how you spent the allowance. Mark adds a few dollars to each of his expenses so he can have some extra cash. You figure that the firm won’t miss a few dollars, so you consider doing the same.