Presentation on theme: "Worksheet for a Merchandising Business"— Presentation transcript:
1 Worksheet for a Merchandising Business Chapter 15Worksheet for a Merchandising Business
2 OBJECTIVES:Define accounting terms related to a work sheet for a merchandising business.Identify accounting concepts and practices related to a work sheet for a merchandising business.Begin a worksheet for a merchandising business.Plan adjustments on a work sheet for a merchandising business.Complete a work sheet for a merchandising business.
3 How Financial Information is Used Management uses it to make decisions on future business operations.Needed to prepare tax reports.Used to obtain additional assets for the business.Shows profit/loss.Can be summarized at any time, but MUST BE done at the end of each fiscal periodOmni: begins Jan 1 ends Dec. 31
4 Ch 15-1:Beginning an 8-Column Work Sheet for a Merchandising Business
5 The Worksheet: Summarizes financial information for a fiscal period Accounting Period CycleChecks the equality of the general ledger- DR=CRUsed in planning adjustmentsDetermines Net Income or LossSorts accounts for preparation of financial statementsStep 1 - TRIAL BALANCE:All accounts from general ledger are listed in the order they are in the ledger.Some accounts will not have a balance (still list them)
6 TRANSFERRING GENERAL LEDGER ACCOUNT BALANCES TO A WORK SHEET Lesson 15-1 (GJ)TRANSFERRING GENERAL LEDGER ACCOUNT BALANCES TO A WORK SHEETRECORDING A TRIAL BALANCE ON A WORK SHEET121. Write the titles of the general ledger accounts.2. Write the balance of each account.3. Total, prove, and rule the debit and credit columns.3
7 Purpose of Adjustments Bring all accounts up to dateSupplies – storeSupplies – officePre-paid InsuranceMerchandise InventoryWhy plan adjustments????The correct income or loss can be determinedThe business pays the correct amount in taxesMATCHING REVENUE WITH EXPENSES
8 Merchandise Inventory Merchandise Inventory The amount of goods on hand for sale to customers.New Asset Account – Normal DR balanceNo entries are recorded in this account during the fiscal period.Purchases is used to record merchandise bought and Sales is used to record merchandise sold.Must adjust Merchandise Inventory to reflect purchases and sales throughout fiscal period2 ways TO DETERMINE INVENTORY:Book inventory - determined by general ledger accounts.Physical inventory - actually count the merchandise.
9 Merchandise Inventory Adjustment Two accounts used for the adjustment:Merchandise InventoryIncome SummaryWhether you debit or credit Merchandise Inventory depends on business conditions.DR – merchandise on hand is GREATER at end of fiscal period (than the beginning)CR – merchandise on hand is LESS at the end of the fiscal period
10 PLANNING ADJUSTMENTS ON A WORK SHEET Merchandise InventoryDebitCreditMerchandise InventoryJan. 1 Bal. 270,480.00Dec. 31 Balance - $254,640.00
11 ANALYZING A MERCHANDISE INVENTORY ADJUSTMENT Lesson 15-1 (GJ)ANALYZING A MERCHANDISE INVENTORY ADJUSTMENTAFTER ADJUSTMENTBEFORE ADJUSTMENTWhat is the balance?What should the balance be?What must be done to correct the account balance?What adjustment is made?Income SummaryAdj. (a) 15,840.00Merchandise InventoryJan 1 Bal. 270,480.00Jan 1 Bal. 270,480.00Adj. (a) 15,840.00(Dec. 31 Bal ,640.00)
12 RECORDING A MERCHANDISE INVENTORY ADJUSTMENT 3211. Write the debit amount.2. Write the credit amount.3. Label the two parts of this adjustment.
13 PLANNING ADJUSTMENTS ON A WORK SHEET Merchandise InventoryDebitCreditMerchandise InventoryJan. 1 Bal ,700.00Dec. 31 Balance - $ 298,900.00
14 Merchandise Inventory ANALYZING AN ADJUSTMENT WHEN ENDING MERCHANDISE INVENTORY IS GREATER THAN BEGINNING MERCHANDISE INVENTORYAFTER ADJUSTMENTBEFORE ADJUSTMENTMerchandise InventoryJan 1 Bal. 294,700.00Adj. (a) 4,200.00(Dec ,900.00)Income SummaryAdj. (a) 4,200.00
15 Another example:Jan. 1 Balance of Merchandise Inventory is $150,000.00Dec. 31 Physical Inventory count is $180,000.00What should your adjusting entry be?
17 What is your adjusting entry? Jan. 31 Balance of Merchandise Inventory is $250,000.00Dec. 31 Physical Inventory count is $180,000.00What is your adjusting entry?
18 TERMS REVIEW inventory merchandise inventory TO DO: Work Together, pg 379On your own, pg 379
19 CHAPTER 15-2: Adjusting and Recording Work Sheet Adjustments Supplies NOT used during fiscal period AssetsSupplies used Supplies ExpensesMATCHING EXPENSES WITH REVENUESupplies Balance on Trial Balance is $580Inventory of Supplies is $430Adjusting EntryDebit Supplies Expense $150 – amount usedCredit Supplies $150 – decreases asset
20 ANALYZING A SUPPLIES ADJUSTMENT Lesson 15-1 (GJ)ANALYZING A SUPPLIES ADJUSTMENTAFTER ADJUSTMENTBEFORE ADJUSTMENTSupplies Expense—Office4. Adj. (b) 4,730.00Supplies—Office1. Dec. 31 Bal. 6,480.00Dec. 31 Bal. 6,480.004. Adj. (b) 4,730.002. (New Bal. 1,750.00)What is the balance?What should the balance be?What must be done to correct the account balance?What adjustment is made?
21 RECORDING SUPPLIES ADJUSTMENTS 3211. Write the debit amounts.2. Write the credit amounts.Label the two parts of this adjustment.***What is the new balance of both supplies accounts??
22 ANALYZING A PREPAID INSURANCE ADJUSTMENT Value of pre-paid insurance NOT used – ASSETValue of pre-paid insurance USED/expired – EXPENSEPre-paid Insurance account does not reflect the value of insurance used during the fiscal periodMust make adjustments
23 ANALYZING A PREPAID INSURANCE ADJUSTMENT AFTER ADJUSTMENTBEFORE ADJUSTMENTInsurance Expense4. Adj. (d) 3,170.00Prepaid InsuranceDec 31 Bal. 5,800.001. Dec 31 Bal. 5,800.004. Adj. (d) 3,170.002. (New Bal. 2,630.00)What is the balance? (5,800)What should the balance be? (2,630)What must be done to correct the account balance?What adjustment is made?
24 RECORDING A PREPAID INSURANCE ADJUSTMENT 3211. Write the debit amount.2. Write the credit amount.Label the two parts of this adjustment.**What is the new balance of the prepaid insurance account????
25 TO DO:Work Together, pg 385On your own, pg 385Application 15-1, 15-2
26 Chapter 15-3: Completing a Work Sheet Same as Encore MusicEXCEPT:Income Summary increases/decreases amount of goods from purchases/sales extend to Income Statement columns
27 COMPLETING AN 8-COLUMN WORK SHEET Lesson 15-1 (GJ)COMPLETING AN 8-COLUMN WORK SHEET211. Extend balance sheet items to Balance Sheet columns.2. Extend income statement items to Income Statement columns.3. Total Income Statement and Balance Sheet columns.4. Calculate net income or net loss.5. Extend net income or net loss to Balance Sheet Debit or Credit column.6. Total Income Statement and Balance Sheet columns.7. Check that totals are in balance.34567
28 PAGE 388 – Completed Work Sheet What does each amount on line 4 represent?Line 5?Line 6?Line 7?Line 22, what is the other half of the adjustment?Which accounts go to the Balance Sheet columns? To the Income Statement columns?How was line 36 calculated?Why is line 36 recorded in Balance Sheet Credit column?
29 10-column worksheetUsed by larger merchandising businesses with many accounts to be adjustedIncluded additional pair of amount columns Adjusted Trial Balance
30 A 10-COLUMN WORK SHEET FOR A MERCHANDISING BUSINESS (LEFT PAGE) 1. Record the trial balance.2. Plan the adjustments.12
31 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.534. Total, prove, and rule the Adjusted Trial Balance columns.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.46
32 TO DO:Work Together, pg 392On your own, pg 392Application Problem 15-3Ch. 15 QuizMastery 15-4Ch. 15 Study GuideTEST – TOMORROW!