The Six-Column Worksheet 11/17/2018 The Six-Column Worksheet Chapter 8

Step 6 Accounting Cycle The Work Sheet 11/17/2018 Step 6 Accounting Cycle The Work Sheet Working paper used to collect information from the ledger accounts in one place With the work sheet, the accountant gathers all of the information needed to prepare the financial statements & to complete the other end-of-period activities

Work Sheet Sections Heading Account name section Trial balance section 11/17/2018 Work Sheet Sections Heading Account name section All general ledger accounts are listed even if they have a zero balance. Avoids accidentally omitting an account & ensures that the worksheet contains all accounts needed to prepare the financial reports. Trial balance section Income statement section Balance sheet section Name of business, name of accounting form, period covered by work sheet Account numbers & names are from general ledger & listed on work sheet in same order that they appear on general ledger: assets, liabilities, owner’s equity, revenue, expenses

11/17/2018 Balance sheet section Contains the asset, liability, & owner’s equity accounts After proving the Trial Balance section, extend or transfer the appropriate amounts to the Balance Sheet section Extend to appropriate debit or credit column on Balance Sheet

Income statement section 11/17/2018 Income statement section Contains the revenue & expense accounts Revenues have a normal credit balance Expense accounts have a normal debit balance

Totaling the Income Statement & Balance Sheet Sections 11/17/2018 Totaling the Income Statement & Balance Sheet Sections Once both sections are totaled, draw a single line across the four Debit & Credit columns indicating that the columns are ready to be added Showing Net Income or Net Loss on the Work Sheet Matching principle- requires matching expenses incurred in an accounting period with revenue earned in the same period Matching revenue w/expenses gives a reliable measure of profit by showing the dollar value of resources used to produce the revenue Owners & managers use this information to analyze results & make decisions

Showing net income on Work Sheet 11/17/2018 Showing net income on Work Sheet Net Income = Total Revenue – Total Expenses Entered as a debit at bottom of Income Statement section Must also be entered as a credit on the balance sheet

Net loss Total expenses is greater than total revenue 11/17/2018 Net loss Total expenses is greater than total revenue Decreases owner’s equity Shown as a debit to the capital account Entered as a credit on income statement & debit on balance sheet