Details and Illustration of Work Sheet

XYZ, COMPANY

Work Sheet

For Month Ended 30^TH June, 2009

ACCOUNT TITLE	TRIAL BALANCE		ADJUSTMENT		PROFIT & LOSS ACCOUNT		BALANCE SHEET
	DEBIT	CREDIT	DEBIT	CREDIT	DEBIT	CREDIT	ASSETS	LIABILITIES AND CAPITAL
Cash Debtors Supplies Prepaid Rent Office Equipment Creditors XYZ, Capital XYZ, Drawing Sales Miscellaneous Expense Supplies Expense Rent Expense Depreciation Expense Accumulated Depreciation Salary Expense Accrued Salaries Net Profit	1,702.00    585.00    750.00    600.00 6,000.00    500.00    103.00	1,400.00 6,300.00 2,540.00	a) 520.00 b) 200.00 c)  50.00 d) 708.00	a) 520.00 b) 200.00 c)  50.00 d) 708.00	103.00  520.00  200.00    50.00 708.00	2,540.00	1,702.00     585.00     230.00     400.00  6,000.00     500.00	1,400.00  6,300.00       50.00     708.00
	10,240.00	10,240.00
			1,478.00	1,478.00	1,581.00 959.00	2,540.00	9,417.00	8,458.00 959.00
					2,540.00	2,540.00	9,417.00	9,417.00

The work sheet for XYZ, Company is presented above. Note that there are three parts to the heading: (1) the name of the enterprise, (2) the title, and (3) the period of time covered. It has a column for account and eight money column, arranged in three pairs of debit and credit columns. The last tow money columns are for the balance sheet and are headed as Assets, and Liabilities and Capital. The principal headings of the four sets of money columns are as follows:

            1.         Trial Balance                3.         Profit and Loss Account

            2.         Adjustments                 4.         Balance Sheet

Trial Balance Columns. Trial balance data may be assembled directly on the work sheet form or it may be prepared on another sheet first and then copied on the work sheet form.

Adjustments Columns. Both the debit and the credit portions of an adjustment should be inserted on the appropriate line before proceeding to another adjustment. Cross-referencing the related debit and credit of each adjustment by letters is useful to anyone who may have occasion to review the work sheet; it is also helpful later when recoding the adjusting entries in the journal. The sequence of adjustments is immaterial except that there is a time and accuracy advantage in following the order in which the adjustment data are assembled. If titles of accounts to be adjusted do not appear in the trial balance, they should be inserted below the trail balance totals as needed.

The adjustment entries for XYZ Company were explained and illustrated by T accounts earlier in the above section. In practice the adjustments are inserted directly on the work sheet on the basis of the data assembled by the accounting department.

Explanatory notes for the entries in the adjustments columns of the work sheet are as follows:

(a)                Supplies. The supplies account has a debit balance of $750; the cost of the supplies on hand at the end of the period in $230; therefore, the supplies expense for June is the difference between the two amounts, or $520. The adjustment is entered by writing (1) Supplies Expense in the Account Title column, (2) $520 in the Adjustments Debit column on the same line, and (3) $520 in the Adjustments Credit column on the line with Supplies.

(b)               Rent.      The prepaid rent account has a debit balance of $600, which represents a payment of three months beginning with June; therefore, the rent expense for June is $200. The adjustment is entered by writing (1) Rent Expense in the Account. Title column, (2) $200 in the Adjustments Debit column on the same line, and (3) $200 in the Adjustments Credit column on the line with Prepaid Rent.

(c)                Depreciation.    Depreciation of the office equipment for the month is estimated at $50. This expired portion of the cost of the equipment is both an expense and a reduction in the asset. The adjustment is entered by writing (1) Depreciation Expense in the Account Title column, (2) $50 in the Adjustments Debit column on the same line, (3) Accumulated Depreciation in the Account Title column, and (4) $50 in the Adjustments Credit column on the same line.

(d)               Salaries.             Salaries accrued but not paid at the end of June amount to $708. This is an increase in expense and an increase in liabilities. The adjustment is entered by writing (1) Salary Expense in the Account Title column, (2) $708 in the Adjustments Debit column on the same line, (3) Accrued Salaries in the Account Title column, and (4) $708 in the Adjustments Credit column on the same line.

The final step in completing the Adjustments columns is to prove the equality of debits and credits by totaling and ruling the two columns.

Profit And Loss Account and Balance Sheet Columns.       The data in the trial balance columns are combined with the adjustments data and extended to one of the remaining four columns. The amounts of assets, liabilities, capital and drawing are extended to the balance sheet columns, and the income and expenses are extended to the profit and loss account columns. This procedure must be applied to the balance of each account listed, beginning at the top and processing down the page in sequential order.

In the illustrative work sheet, the first account listed is Cash and the balance appearing in the trial balance is $1,702. Since there are no adjustments to Cash, the trial balance amount is to be extended to the appropriate column. Cash is an asset, it is listed on the balance sheet, and it has a debit balance. Accordingly, the amount of $1,702 is extended to the asset column of the balance sheet section. The balance of Debtors is extended in similar fashion. Supplies have an initial debit balance of $750 and a credit adjustment (decrease) of $520. The amount to be extended is, therefore, the remaining debit balance of $230. The same procedure is continued until all account balances, with or without adjustment as the case may be, have been all account balance, with or without adjustment as the case may be, have been extended to the appropriate commune. The balance of the capital and drawing accounts are extended to the balance sheet section. Note that for accounts listed below the trial balance total, the account balance is the amount of the adjustment. For example, Supplies Expense has no initial balance and a debit adjustment of $520 which is the amount extended to the debit column of the profit and loss account section.

After all of the balances have been extended, each of the four columns is totaled. The amount of the net profit or the net loss for the period is then determined by ascertaining the amount of the difference between the totals of the two profit and loss account columns. If the credit columns total is greater than the debit column total, the excess is the net profit. For the work sheet presented above, the computation of net profit is as follows:

            Total of credit column (income)………………..           $          2,540

            Total of debit column (expenses)………………           $          1,581

                                                                                           _________________      

            Net profit (excess of income over expenses)…..            $          959

                                                                                          ================

Income and expenses accounts, which are in reality subdivisions of the capital account, are temporary in nature. They are used during the accounting period to facilitate the accumulation of detailed operating data in order to determine the net profit or net loss for the period after they have served their purpose, the net balance, which in the illustration is a credit or net profit of $959, will be transferred to the capital account in the ledger. This transfer is accomplished on the work sheet by entries in the profit and loss account debit column and the balance sheet liabilities and capital column, as illustrated in work sheet report. If there had been a net loss instead of a net profit, the amount would have been entered in the profit and loss account credit column and the balance sheet assets column.

After the final entry on the work sheet, each of the last four columns is totaled to verify the arithmetic accuracy of the amount of net profit or net loss transferred from the profit and loss account to the balance whet. The total of the two profit and loss account columns must be equal, as must the totals of the two balance sheet columns. If there are great many adjustments, it may be advisable to inset a section and the profit and loss account section. The arithmetic of combing the data may then be verified before extending balances to the profit and loss account and the balance sheet sections. Other variations in form may be introduced to meet special requirements or to accord with the preferences of the particular user.BlackBerry Bold 9700 Phone (AT&T)