Transcript Ch. 8

The Six-Column Work
Sheet
The Sixth Step of the Accounting
Cycle: The Work Sheet
•
A work sheet a working paper that is used to collect
information from the ledger accounts in one place.
•
It is a tool used by accountants to help them prepare
financial statements and complete end-of-fiscal
period activities.
The Work Sheet Heading
(1)
(3)
(2)
(1) The name of the business
(2) The name of the
accounting form
(3) The period covered by the
work sheet
(Who?)
(What?)
(When?)
The Account Name and Trial
Balance Sections
•
Information in these sections come from the
general ledger accounts!
•
All accounts are listed, even those with zero
balances.
Ruling and Totaling the Trial
Balance Section
• Ruling means “drawing a line”. In
accounting a single rule drawn under a
column of amounts means that the
entries above the rule are to be added or
subtracted.
• Total the debits and the credits. If they
are equal then you are ready to double
rule.
• A double rule means the amounts just
above are totals, they are equal and that
no other entries will be made below them.
Ruling and Totaling the Trial
Balance Section
 Total debits must equal total credits.
The Balance Sheet Section
This contains the balance sheet
accounts:
• Assets
• Liabilities
• Owner’s Equity
• After the Trial Balance section is
proved, the next step is to extend, or
transfer, the appropriate amounts to
the Balance Sheet section.
The Balance Sheet Section
The Income Statement Section
This contains the income statement
accounts:
• Revenues
• Expenses
• After the Trial Balance section is proved
and the Balance Sheet section has been
transferred, the next step is to extend, or
transfer, the appropriate amounts to the
Income Statement section.
The Income Statement Section
Totaling the Income Statement
and Balance Sheet Sections
1) A single rule is drawn across the four
debit and credit columns to indicate that
the columns are ready to be added.
2) After the four columns are totaled, notice
that the debit and credit columns in each
section are not equal.
•
The column totals will NOT equal
until the net income or net loss for
the period is added.
Totaling the Income Statement
and Balance Sheet Sections
Showing Net Income on the Work
Sheet
In accounting, expenses incurred in an
accounting period are matched with the
revenue earned during the same period.
This is called the matching principle.
Matching expenses of a period with revenue
of the same period provides a reliable
measure of profit, because it shows the
cost of producing the revenue.
Showing Net Income on the Work
Sheet
Net Income is the amount of revenue that remains
after expenses for the period are subtracted.
•
Skip a line after the last account and write the
words “Net Income” in the Account Name
Column.
•
On the same line, enter the net income amount
in the Income statement debit column.
•
On the same line, enter the net income amount
on the Balance sheet credit column.
Showing Net Income on the
Work Sheet
Completing the Work Sheet
1)
On the line under the net income amount, draw a single
rule across the four columns.
2)
In the Income Statement section debit column, add the
net income amount to the previous total and enter the
new total. Bring down the total of the Income Statement
section credit column. Total debits should equal total
credits.
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 amount 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 that no more amounts are to be entered in
these columns.
Completing the Work Sheet
The Effects of Income or Loss
on Capital
Revenue > Expenses = Net Income
Capital Increases
Revenue < Expenses = Net Loss
Capital Decreases