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The heading should identify the entity, the document and the time period. The worksheet collects and summarizes the information used to prepare financial statements, adjusting entries and closing entries. Step 1 Enter the unadjusted trial balance on the worksheet.
Enter the unadjusted trial balance on the worksheet
Enter the adjustments directly onto the worksheet
You may need to add additional accounts
Sum the unadjusted trial balance with the adjustments and enter the total in the adjusted trial balance column.
Remember that if an account has a debit balance on the unadjusted trial balance, it will have a debit balance on the adjusted trial balance as well.
A debit balance is increased by a debit adjustment but would be decreased by a credit adjustment. Therefore, for supplies, $3,600 – 1,050 = 2,550
Similarly, if an account has a credit balance on the unadjusted trial balance, it will have a credit balance on the adjusted trial balance as well.
When an account has a credit balance on the unadjusted trial balance, it will be decreased by a debit adjustment and increased by a credit adjustment. For unearned consulting revenue, $3,000 - 250 = $2,750
If a new account was added because of adjusting entries, then the adjusted trial balance will equal the amount of the debit or credit entered in the adjustments column.
Don’t forget to add all the debits in the debit column of the adjusted trial balance and make sure they are equal to all of the credits in the credit column. As always,Dr = Cr
Complete the worksheet.
Once the adjusted trial balance columns are in balance, you can ignore the previous four columns. Only the balance from the adjusted trial balance column will be entered in ONE of the last four columns.
The income statement columns will only have income statement accounts in them (i.e. revenues and expenses). Revenues have credit balances and will therefore be entered in the credit columns.
Expenses have debit balances and will therefore be entered in the debit columns.
The balance sheet columns contain assets, liabilities, capital and withdrawals. A debit from the adjusted trial balance is recorded in the debit column of the balance sheet.
A credit from the adjusted trial balance is recorded in the credit column of the balance sheet.
Calculate net income (loss) by subtracting the debits (expenses) from the revenues (credits). This amount should be entered under the smaller of the two totals. In this case,$6,150 – 4,085 = 2,065. This number will be put in the debit column.
Since net income was entered in the debit column of the income statements, it will also be entered in the balance sheet. This time, as a credit, since Dr = Cr
Now, the last check of the worksheet is to total the income statement and balance sheet columns again. If you have completed the worksheet correctly: Dr = Cr
Now, how do we complete this section of the work sheet in the case of a net loss? To demonstrate, assume instead that total expenses were 4,085 and revenues were 2,500.
Under this assumption, the difference between revenues and expenses equals a net loss of 1,585. This amount should be entered under the smaller of the two totals. Enter 1,585 in the credit column of the income statement and the debit column of the balance sheet.