1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 6-2 Planning Adjusting Entries on a Work Sheet Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

2. CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 6-2 Planning Adjusting Entries on a Work Sheet Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period are called adjustments In order to give accurate information on financial statements, some general ledger accounts must be brought up to date at the end of a fiscal period. The accounting concept matching expenses with revenue is applied when revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period.

3. CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 6-2 Planning Adjusting Entries on a Work Sheet In order to give accurate information on financial statement, some general ledger accounts must be brought up to date at the end of a fiscal period. Adjustments are made in the adjustments column of the worksheet. Examples of accounts that might need to be adjusted at the end of a fiscal period: Prepaid Insurance Supplies Depreciation

4. CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 6-2 SUPPLIES ADJUSTMENT ON A WORK SHEET 1 2 page 158 3 1.Write the debit amount. 2.Write the credit amount. 3.Label the two parts of this adjustment. On August 31, Ms. Park counted the supplies on hand & found that the value of supplies still unused on that date was $310.00. The balance of the Supplies account in the General Ledger is $1,025.00.

5. CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 6-2 PREPAID INSURANCE ADJUSTMENT ON A WORK SHEET page 159 1 2 3 1.Write the debit amount. 2.Write the credit amount. 3.Label the two parts of this adjustment. On August 31, Ms. Park checked the insurance records & found that the value of insurance coverage remaining was $1,100.00. The balance of the Prepaid Insurance account in the General Ledger is $1,200.00.

6. CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 6-2 PROVING THE ADJUSTMENTS COLUMNS OF A WORK SHEET page 160 3.Rule double lines. 2.Add both the Adjustments Debit and Credit columns. Write each column’s total. 1.Rule a single line. 1 3 2 After all adjustments are recorded in a worksheet’s Adjustments columns, the equality of debits & credits for the two columns is proved by totaling & ruling the two columns

7. CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 6-2 PREPARING A WORK SHEET 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.

8. CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 6-2

9. CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 6-2 1

10. CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 6-2 (b) 10000 4 (a) 71500 3 496400 10000 15000 11000 10000 102500 120000 20000 5000 500000 62500 356500 21300 2800 30000 881500 81500 146600356500734900525000 356500734900 496400 10000 15000 10000 31000 110000 20000 5000 500000 62500 6 11000 21300 2800 30000 356500 10000 71500 7 209900 Net Income 8 9 1 2 5 356500734900

11. CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON 6-2 TERM REVIEW adjustments page 161