XYZ, COMPANY
Work Sheet
For Month Ended 30TH 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.
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