LESSON 6-1 WORK SHEET FOR A SERVICE BUSINESS 4/22/2017 CHAPTER 6 WORK SHEET FOR A SERVICE BUSINESS

Fiscal Period: The length of time for which a business 6-1 CREATING A WORK SHEET Fiscal Period: The length of time for which a business summarizes and reports financial information. 1 Month, 6 Months, 1 Year Business can choose length which suit their needs. Period can be any date, though most businesses begin on the first day of the month. Work Sheet: A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.

PREPARING THE HEADING OF A WORK SHEET page 153 Name of Company 1 Name of Report 2 Date of Report 3 Trial Balance: A proof of the equality of debits and credits in the general ledger. -Account titles listed in the same order as chart of accounts. -All accounts are listed even if they do not have a balance.

PREPARING A TRIAL BALANCE ON A WORK SHEET page 154 2 1. Write the general ledger account titles. 2. Write the general ledger debit account balances. Write the general ledger credit account balances. 1 4 3. Rule a single line across the two Trial Balance columns. 4. Add both the Trial Balance Debit and Credit columns. 5. Write each column’s total below the single line. 3 6. Rule double lines across both Trial Balance columns. 5 6

6-2 PLANNING ADJUSTING ENTRIES ON A WORK SHEET LESSON 6-1 4/22/2017 6-2 PLANNING ADJUSTING ENTRIES ON A WORK SHEET Adjustments: Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period. -Assets like supplies and prepaid insurance are used to earn revenue. -What we have actually used to earn revenue become expenses. -We use the work sheet to plan adjustments 4 Questions we ask when analyzing adjustments: 1. What is the balance? 2. What should the balance be? 3. What must be done to correct the account balance? 4. What adjustment is made? Look at pages 158-159

SUPPLIES ADJUSTMENT ON A WORK SHEET page 158 2 3 1 1. Write the debit amount. 2. Write the credit amount. 3. Label the two parts of this adjustment.

PREPAID INSURANCE ADJUSTMENT ON A WORK SHEET page 159 2 3 1 1. Write the debit amount. 2. Write the credit amount. 3. Label the two parts of this adjustment.

PROVING THE ADJUSTMENTS COLUMNS OF A WORK SHEET page 160 1 2 3 1. Rule a single line. 2. Add both the Adjustments Debit and Credit columns. Write each column’s total. 3. Rule double lines.

PREPARING A WORK SHEET 1. Write the heading. page 160 C 1. Write the heading. 2. Record the trial balance. 3. Record the supplies adjustment. 4. Record the prepaid insurance adjustment. 5. Prove the Adjustments columns. 6. Extend all balance sheet account balances. 7. Extend all income statement account balances. 8. Calculate and record the net income (or net loss). 9. Total and rule the Income Statement and Balance Sheet columns.

1 2 496400 10000 15000 11000 102500 120000 20000 5000 500000 62500 356500 21300 2800 30000 496400 10000 15000 31000 110000 20000 5000 500000 62500 6 (a) 71500 3 (b) 10000 4 11000 21300 2800 30000 356500 10000 71500 7 5 881500 881500 81500 81500 146600 356500 734900 525000 Net Income 8 209900 209900 9 356500 356500 734900 734900

6-3 EXTENDING BALANCE SHEET ACCOUNT BALANCES ON A WORK SHEET LESSON 6-1 4/22/2017 6-3 EXTENDING BALANCE SHEET ACCOUNT BALANCES ON A WORK SHEET page 162 At the end of each fiscal period, TechKnow prepares two financial statements from information on the worksheet. Balance Sheet: Reports assets, liabilities, and owner’s equity on a SPECIFIC Date. 2 1 3 1. Debit balances without adjustments 2. Debit balances with adjustments 3. Credit balances without adjustments

EXTENDING INCOME STATEMENT ACCOUNT BALANCES ON A WORK SHEET page 163 Income Statement: A financial statement showing revenue and expenses for fiscal period called an income statement. 1 2 3 1. Sales balance 2. Expense balances without adjustments 3. Expense balances with adjustments

RECORDING NET INCOME, AND TOTALING AND RULING A WORK SHEET page 164 Revenue > Expenses = Net Income 4 1 2 3 5 6 7 1. Single rule 2. Totals 4. Extend net income 6. Totals 3. Net income 5. Single rule 7. Double rule

CALCULATING AND RECORDING A NET LOSS ON A WORK SHEET page 165 Expenses > Revenue = Net Loss 1 2 3 4 1. Single rule 2. Totals 3. Net loss 4. Extend net loss