Presentation on theme: "Chapter 14, Section 2. The work sheet is used to summarize financial information needed to prepare financial statements Step to prepare a work sheet:"— Presentation transcript:
The work sheet is used to summarize financial information needed to prepare financial statements Step to prepare a work sheet: Heading – Company Name, Work Sheet, Date Trial Balance – Prove debits and credits are equal Adjustments – update assets and expense accounts Extend Balances – Separate according to Income Statement and Balance Sheet Calculate and Record Net Income/Loss
1 3 2 1.Account titles 2.Account balances 3.Total, prove, and rule the debit and credit columns
Up to this point, we have only recorded the purchases of new supplies We must bring the asset and expense accounts up-to-date to reflect supplies used Example: Supplies—Office account balance = $3,480.00 Actual office supplies on hand = $750.00 Subtract these two numbers to determine amount of adjustment $3,480.00 – 750.00 = $2,730.00 Debit Supplies Expense—Office Credit Supplies—Office Repeat for Supplies—Store account
2 1 1.Write the debit amounts in the Adjustments Debit column. 2.Write the credit amounts in the Adjustments Credit column. 3.Label the two parts of the Supplies—Office adjustment with small letter (a) in parentheses. 3 3 4.Label the two parts of the Supplies—Store adjustment with small letter (b) in parentheses.
We must bring the asset and expense accounts up- to-date to reflect insurance used. Example: Prepaid Insurance account balance = $5,800.00 Value of Insurance = $2,630.00 Subtract these two numbers to determine amount of adjustment. $5,800.00 – 2,630.00 = $3,170.00 Debit Insurance Expense; Credit Prepaid Insurance
1 2 3 3 1.Enter the amount of insurance used in the Adjustments Credit column. 2.Enter the same amount in the Adjustments Debit column. 3.Label the two parts of the adjustment with a small letter (c) in parentheses.
Work Together 14-2 (text pg. 414) On Your Own 14-2 (text pg. 414) Application 14-2 (text pg. 438)