Work Sheet for a Service Business Chapter 7 Work Sheet for a Service Business

Fiscal Periods A fiscal period can be a month, six months, or a year, for which to summarize and report financial information. Most businesses use a one-year fiscal period. A fiscal period can begin on any date, however most begin on the first day of a month.

Work Sheet A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.

Four Reasons Accountants Use A Work Sheet To summarize GL account balances to prove that D and C equal. To plan needed changes to GL accounts to bring account balances up to date. To separate GL account balances according to the financial statements to be prepared To calculate the amount of net income or net loss for a fiscal period.

Heading on a Work Sheet Name of business Name of report Date of report

Trial Balance A proof of the equality of debits and credits in a General Ledger. Information is obtained from General Ledger. All account titles are listed, even if some accounts do not have balances. (They will be needed in other parts of the work sheet)

Seven Steps in Preparing a Trial Balance Write the GL account titles in the WS’s Account Title column. Write the GL debit balances in the Trial Balance debit column. (Same for credits) Rule a single line. Add debits and credits. Check the equality. Write the total below single line. Rule with double lines.

Adjustments Changes recorded on a WS to update GL accounts at the end of a fiscal period. Four questions to ask when analyzing adjustments: What is the balance of the account? What should the balance be for this account? What must be done to correct the account balance? What adjustment is made?

Extending Financial Statement Information on a Work Sheet Balance Sheet shows: Assets Liabilities Owner’s Equity Income Statement shows: Revenue Expenses

Calculating Net Income and Net Loss Sales greater than expenses. Net Loss: Expenses greater than sales.

Errors If the difference is 1, such as $.01, .10, 1.00, or 10.00 the error is most likely in addition, add again If the difference can be divided evenly by 2, divide the amount and look for that number If the difference can be divided evenly by 9 the error is most likely a transposition error If the difference is an omitted amount look for the amount equal to the difference