1. Chapter 15 – Objectives and Essential Questions Objectives: 1.Define accounting terms related to a work sheet for a merchandising business. 2.Identify accounting concepts and practices related to a worksheet for a merchandising business. 3.Begin a work sheet for a merchandising business. 4.Plan adjustments on a work sheet for a merchandising business. 5.Complete a work sheet for a merchandising business. Essential Questions 1.In what order should general ledger accounts be listed on a work sheet? 2.What accounts are used for the adjustment for merchandise inventory? 3.What accounts are used for the adjustment to office supplies? 4.What accounts are used for the adjustment to prepaid insurance? 5.What extra step is required when a 10-column work sheet is prepared instead of an 8-column work sheet? 6.To which Balance Sheet column is a net loss amount extended? 7.In what column is the Income Summary amount extended? 8.When does a net loss appear on a work sheet?

2. FINANCIAL INFORMATION IN GENERAL Shows whether a profit is being made or a loss is being incurred Needed to prepare required tax reports Helps management make decisions about future operations How often are they prepared? At least once each fiscal period * OMNI IMPORT uses a one-year fiscal period that begins on January 1 and ends on December 31 * OMNI summarizes its financial information on December 31 of each year Lesson 15-1, page 372

3. THE WORKSHEET (take 2) Worksheet - a columnar accounting form on which the financial information needed to prepare financial statements is summarized *Used to plan adjustments and sort financial information *May be prepared whenever a business needs it… *But always prepared at the end of each fiscal period because financial statements are prepared at the end of each fiscal period *First step is to write the account titles in the order of and as they appear in the general ledger *All accounts are listed regardless of whether there is a balance or not Lesson 15-1, page 374

4. FIRST STOP - THE TRIAL BALANCE Why? *Proves that debits equal credits Tip: *Don’t go any further than the trial balance if it doesn’t equal. You will be extending the obvious errors! **Foolish and Frustrating! How? *Simply copy final balances from the General Ledger Accounts & make sure Dr. = Cr. Lesson 15-1, page 375

5. 1. Write the titles of ALL of the general ledger accounts. (even if -0- balance) 1 1 2.Write the balance of each account. 2 2 TRANSFERRING GENERAL LEDGER ACCOUNT BALANCES TO A WORK SHEET RECORDING A TRIAL BALANCE ON A WORK SHEET Lesson 15-1, page 374-375 3 3.Total, prove, and rule the debit and credit columns.

6. RELATED ACCOUNTS SuppliesSupplies Expense Prepaid InsuranceInsurance Expense Merchandise Inv.Income Summary Merchandise Inventory Inventory = the amount of goods on hand Merchandise Inventory = the amount of goods on hand for sale to customers

7. PLANNING ADJUSTMENTS ON A WORK SHEET Jan. 1 Bal.270,480.00 Merchandise Inventory DebitCredit Merchandise Inventory Lesson 15-1, page 376 ! *Needs to be updated. (it’s now December 31st) *We’ve sold stuff (SALES) and purchased stuff (PURCHASES), but we haven’t touched MERCHANDISE INVENTORY Merchandise Inventory balance (according to books): 270,480.00 Merchandise Inventory (actual) should be: 254,640.00 270,480.00 - 254,640.00 = 15,840.00

8. AFTER ADJUSTMENT Income Summary Jan 1 Bal.270,480.00 (New Bal.254,640.00) ANALYZING A MERCHANDISE INVENTORY ADJUSTMENT Adj. (a)15,840.00 Merchandise Inventory Adj. (a)15,840.00 Lesson 15-1, page 377 (No related expense account for Merchandise Inventory so Income Summary is used) Merchandise Inventory balance (according to books): 270,480.00 Merchandise Inventory should be: 254,640.00 270,480.00 - 254,640.00 = 15,840.00

9. RECORDING A MERCHANDISE INVENTORY ADJUSTMENT 1 1. Write the debit amount. 2 2.Write the credit amount. 3.Label the two parts of this adjustment. 3 Lesson 15-1, page 378 Income Summary Jan 1 Bal.270,480.00 (New Bal.254,640.00) Adj. (a)15,840.00 Merchandise Inventory Adj. (a)15,840.00

10. ANALYZING AN ADJUSTMENT WHEN ENDING MERCHANDISE INVENTORY IS GREATER THAN BEGINNING MERCHANDISE INVENTORY AFTER ADJUSTMENT Income Summary Jan 1 Bal.294,700.00 Adj. (a)4,200.00 Merchandise Inventory Adj. (a)4,200.00 Lesson 15-1, page 379 (New Bal. 298,900.00) Merchandise Inventory balance: 294,700.00 Merchandise Inventory should be: 298,900.00 298,900.00 – 294,700.00 = 4,200.00

11. Work Together 15-1 (p.379 wb347 & 349) & On Your Own 15-1 (p.380 wb348 & 350)

12. WT + - Page 349 Adjust for the difference

13. OYO

14. BEFORE ADJUSTMENT AFTER ADJUSTMENT ANALYZING A SUPPLIES ADJUSTMENT – p381 Lesson 15-2, page 381 6,480.00 – 1,750.00 = 4,730.00 Books – Actual = Adjustment Dec. 31 Bal.6,480.00 Supplies Expense—Office Supplies—Office (New Bal.1,750.00) Adj. (b)4,730.00 + -

15. RECORDING SUPPLIES ADJUSTMENTS 3 3 3.Label the two parts of this adjustment. (don’t label in Excel) 1 1. Write the debit amounts. 2 2.Write the credit amounts. Lesson 15-2, page 382 Dec. 31 Bal.6,480.00 Supplies Expense—Office Supplies—Office (New Bal.1,750.00) Adj. (b)4,730.00 + -

16. AFTER ADJUSTMENT ANALYZING A PREPAID INSURANCE ADJUSTMENT Lesson 15-2, page 383 5,800.00 – 2,630.00 = 3,170.00 Books – Actual = Adjustment Dec 31 Bal.5,800.00 Insurance Expense Prepaid Insurance (New Bal.2,630.00) Adj. (d)3,170.00 + -

17. RECORDING A PREPAID INSURANCE ADJUSTMENT 3 3 3.Label the two parts of this adjustment. (don’t label in Excel) 1 1. Write the debit amount. 2 2.Write the credit amount. Lesson 15-2, page 384 Dec 31 Bal.5,800.00 Insurance Expense Prepaid Insurance (New Bal.2,630.00) Adj. (d)3,170.00 + -

18. Adjustments GAAP – Matching Expenses with Revenue – applicable when revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period After we use supplies (pencils, ink, etc.), we no longer have them No longer assets…we need to “expense” them Supplies Account Balance, Aug. 31 4,751.002187.00 Supplies On Hand, Aug 31 Supplies Used During August, Aug 31 2564.00 - = Estimate how much you actually have (in the closets, drawers, etc.)

19. Work Together 15-2 (p.385 wb349) & On Your Own 15-2 (p.385 wb350)

20. WT Prepaid Insurance was: 5540.00 is: 2540.00 difference: 3000.00 Adjust for the difference: Debit Insurance Expense Credit Prepaid Insurance Supplies – Office was: 6091.00 is: 1646.00 difference: 4445.00 Adjust for the difference: Debit Supplies Expense – Office Credit Supplies – Office Supplies – Store was: 6516.00 is: 2838.00 difference: 3678.00 Adjust for the difference: Debit Supplies Expense – Store Credit Supplies – Store

21. OYO

22. 1.Extend balance sheet items to Balance Sheet columns. 2.Extend income statement items to Income Statement columns. COMPLETING AN 8-COLUMN WORK SHEET 21 3.Total Income Statement and Balance Sheet columns. 4.Calculate net income or net loss. Cr - Dr 4 3 5.Extend net income or net loss to Balance Sheet Debit or Credit column. 5 6.Total Income Statement and Balance Sheet columns. 6 7.Check that totals are in balance. 7 Lesson 15-3, page 386

23. A 10-COLUMN WORK SHEET FOR A MERCHANDISING BUSINESS (LEFT PAGE) 1.Record the trial balance. 2.Plan the adjustments. 12 Lesson 15-3, page 390

24. A 10-COLUMN WORK SHEET FOR A MERCHANDISING BUSINESS (RIGHT PAGE) 3.Extend the balances in the Trial Balance columns to the Adjusted Trial Balance columns. 4.Total, prove, and rule the Adjusted Trial Balance columns. 3 4 5 6 5.Extend the amounts in the Adjusted Trial Balance columns to the appropriate Income Statement and Balance Sheet columns. 6.Total, prove, and rule the appropriate Income Statement and Balance Sheet columns. Lesson 15-3, page 391

25. Work Together 15-3 (p.392 wb347) & On Your Own 15-3 (p.392 wb348)

26. WT

27. OYO

28. THE WORKSHEET (take 2) Income Statement Credit – Income Statement Debit = Net Income (or Loss) 423,120.00 -353,504.15 69,615.85