Chapter 8 the six column work sheet
This presentation is the property of its rightful owner.
Sponsored Links
1 / 77

Chapter 8 – The six-Column Work Sheet PowerPoint PPT Presentation


  • 51 Views
  • Uploaded on
  • Presentation posted in: General

Chapter 8 – The six-Column Work Sheet. May 16, 2012. What is the purpose of Accounting?. To make wise business decisions. Work Sheet. An informal business paper used to organize and plan the information for the financial statements.

Download Presentation

Chapter 8 – The six-Column Work Sheet

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Chapter 8 the six column work sheet

Chapter 8 – The six-Column Work Sheet

May 16, 2012


What is the purpose of accounting

What is the purpose of Accounting?


To make wise business decisions

To make wise business decisions


Work sheet

Work Sheet

  • An informal business paper used to organize and plan the information for the financial statements.


Specifically for this chapter you will learn how to use a 6 column work sheet

Specifically for this Chapter you will learn how to use a 6-column work sheet


You will learn about 8 column work sheet in chapter 9

You will learn about 8-column work sheet in Chapter 9


Control accounts

Control Accounts

  • Accounts used to represent the sum of individual accounts of the same type.

  • Example: Accounts Receivable control accounts is the sum of all the individual Accounts Receivables.


Steps for preparing a work sheet

Steps for Preparing a Work Sheet

  • Step 1 – Write in the heading.


Step 1

Step 1

  • The heading from left to right:

  • Company name

  • “Work Sheet”

  • Year Ended December 31, 20--


Steps for preparing a work sheet1

Steps for Preparing a Work Sheet

  • Step 1 – Write in the heading.

  • Step 2 – Enter all accounts with their balances in the first two columns under “Trial Balance.” Ensure it is in balance.


Steps for preparing a work sheet2

Steps for Preparing a Work Sheet

  • Step 1 – Write in the heading.

  • Step 2 – Enter all accounts with their balances in the first two columns under “Trial Balance.” Ensure it is in balance.

  • Step 3 - Extend the amounts to the corresponding columns on the right.


Step 3

Step 3

  • Assets and Liabilities go in the two farthest columns under “Balance sheet.”

  • Sales/Revenue and Expenses go to the middle columns under “Income Statement.”


Steps for preparing a work sheet3

Steps for Preparing a Work Sheet

  • Step 1 – Write in the heading.

  • Step 2 – Enter all accounts with their balances in the first two columns under “Trial Balance.” Ensure it is in balance.

  • Step 3 - Extend the amounts to the corresponding columns on the right.

  • Step 4 – Balance the worksheet


Step 4

Step 4

  • The income statement and Balance Sheet, alone, are not expected to balance

  • The difference between Sales/Revenue and Expenses represents the Net income/loss

  • The Net Income should also match the difference between assets and liabilities


Net income or net loss

Net Income  or Net Loss 

  • Net Income: Sales/Revenue > Expenses

  • Represented as a Debit under the Income statement and a Credit under the Balance Sheet columns

  • Net Loss: Sales/Revenue < Expenses

  • Represented as a CR under the Income statement and a DR under the Balance Sheet columns


Test your knowledge

Test your knowledge


What is the purpose of accounting1

What is the purpose of Accounting?


What is the purpose of accounting2

What is the purpose of Accounting?

  • To make wise business decisions


How do you tell if a company has made a profit or loss

How do you tell if a company has made a profit or loss?


How do you tell if a company has made a profit or loss1

How do you tell if a company has made a profit or loss?

  • If Sales/Revenue is greater than expenses


What are the six steps of the accounting cycle learned so far

What are the six steps of the accounting cycle learned so far?


What are the six steps of the accounting cycle learned so far1

What are the six steps of the accounting cycle learned so far?

  • Transactions occur

  • Transactions journalized

  • Journal entries posted to ledger

  • Trial Balance prepared

  • Worksheet prepared

  • Income statement and balance sheet prepared


Chapter 8 how accountants use income statements

Chapter 8 – How Accountants use Income Statements

May 17, 2012


Comparing income statements

Comparing Income Statements

  • Used to calculate the change as either a dollar amount($) or percentage (%)


Example

Example


This is just one example looking specifically at car expense

This is just one example looking specifically at Car Expense


Chapter 8 the six column work sheet

Accountants will use this analysis with several accounts and try to implement changes to make the company more profitable / efficient


Try it yourself

Try it yourself

20102011

Wages Expense$21,000$39,000

Calculate both the dollar change and percentage change.


Try it yourself1

Try it yourself

20102011

Wages Expense$21,000$39,000

Calculate both the dollar change and percentage change.

Dollar Change = 39,000-21,000 = 18,000

Percent Increase = 18,000/21,000 = 85.7%


Trend analysis

Trend Analysis

  • Shows financial data over a number of consecutive periods.


When looking at the final results only important information on variance is ignored

When looking at the final results only, important information on variance is ignored


How to compare companies of different sizes

How to compare companies of different sizes


Common size income statements

Common-Size Income Statements

  • Income statements of two companies compared side by side while expense accounts are shown as a percentage of sales.


Common size equation

Common-size Equation


How accountants use balance sheets

How Accountants Use Balance Sheets

May 23, 2012


Test your knowledge1

Test your knowledge


What is the purpose of accounting3

What is the purpose of Accounting?


What is the purpose of accounting4

What is the purpose of Accounting?

To make wise business decisions


The 3 financial documents on a six column work sheet are

The 3 financial documents on a six-column work sheet are:


The 3 financial documents on a six column work sheet are1

The 3 financial documents on a six-column work sheet are:

  • Trial Balance

  • Income Statement

  • Balance Sheet


Fill in the blank

Fill-in the blank

  • When creating a six-column worksheet drawings is add to the ___________ column.


Fill in the blank1

Fill-in the blank

  • When creating a six-column worksheet drawings is add to the Balance Sheet debit column.


True false

True / False

  • In a six column work sheet, the difference between the assets and the liabilities/capital is the net income/loss.


Chapter 8 the six column work sheet

True


Fill in the blanks

Fill-in the blanks

  • Net income occurs when the total _________ of the balance sheet are greater than the total __________ of the balance sheet.


Fill in the blanks1

Fill-in the blanks

  • Net income occurs when the total debits of the balance sheet are greater than the total credits of the balance sheet.


Question

Question

  • Which techniques have you learned so far to analyze income statements?


Techniques

Techniques

  • Amount changes

  • Percent changes

  • Trend analysis

  • Common-size income statements


How can two companies income statements of different sizes be compared

How can two companies’ income statements of different sizes be compared?


How can two companies income statements of different sizes be compared1

How can two companies’ income statements of different sizes be compared?

  • Divide all account values by the total sales and show changes as percentages.


How accountants use balance sheets1

How Accountants Use Balance Sheets

May 23, 2012


You have learned the account form of the balance sheet

You have learned the account form of the balance sheet


Account form of the balance sheet

Account form of the balance sheet

  • Assets listed on the left side

  • Liabilities and Capital listed on the right


Heading

Assets

Liabilities

Capital

Heading


Report form of the balance sheet

Report form of the balance sheet

  • Assets on the top

  • Liabilities and Capital on the bottom

  • Allows for easier analysis


Heading1

Assets

Liabilities

Capital

Heading


Classified balance sheet

Classified Balance Sheet

  • Data grouped according to major categories


The categories are

The categories are:


Current assets

Current Assets

  • Assets that will be converted into cash (or used up) during the next year.


Fixed assets

Fixed Assets

  • Long-term (plant and equipment): assets held for their usefulness in producing goods or services


What do you think current liabilities are

What do you think Current Liabilities are?


Current liabilities

Current Liabilities

  • Short-term debts, payment of which is expected to occur within one year (of the balance sheet date).


Long term liabilities

Long-term liabilities

  • Debts of the business that are not due within one year.


Capital

Capital

  • Shows starting Capital

  • Net income/Loss

  • Drawings

  • Current Capital


Working capital and the ability to pay debts

“Working Capital” and the Ability to pay Debts


Working capital

Working Capital

Working Capital = Current Assets – Current liabilities

  • Used to determine the ability of a company to pay debts

  • Higher the working capital the better


Example1

Example

Dares Bikes:

  • Current Assets = $50,000

  • Current Liabilities = $30,000

  • What information does this give us regarding Dares Bikes?


Working capital1

Working Capital

  • Working Capital = 50,000-30,000 = 20,000

  • Dares Bikes within the next year expects to receive $50,000 from sources and must pay $30,000. With a working capital of $20,000, Dares Bikes has an excellent ability to pay off debts. Dares Bikes may in fact wish to borrow more money to expand business.


Comparative statements trend analysis and common size statements

Comparative statements, Trend analysis and common-size statements


Comparative statements

Comparative Statements

  • Compares statements of a previous year to the current year and shows the increase/decrease for each account (as an amount and percent)


Example2

Example

  • P272


Trend analysis1

Trend Analysis

  • Used to show changes over several periods

  • Example p 273


Common size statements

Common-Size Statements

  • All account balances are divided by total assets


  • Login