1. Unit 12 – Worksheet, Adjustments, Financial Statements

2. Eight-Column Worksheet
-how adjustments are first prepared on the worksheet (same way as 6 – column) …just need to add 2 columns for adjustments.
In the following order:
Trial Balance
Adjustments
Income Statement
Balance sheet

3. Eight-Column Work Sheet
SEE FIGURE 6.5
(Page 221)

4. Adjustment #1 (Supplies)
A count made of all supplies on hand shows $900 worth left on January 31.
See Figure 6.6 – Page 223
Total supplies purchased
Less: Supplies left
Supplies used
$1000
900
$100
Supplies
Jan
Balance
Jan
Supplies Expense
Jan

5. Adjustment #2 (Prepaid Insurance)
In January, a $720, one year insurance policy was purchased. One month of the policy is now expired.
See Figure 6.7 – Page 225
Insurance for 1 year
Per month (1/12 * 720)
$720
$60
Prepaid Insurance
Jan
Balance
Jan
Insurance Expense
Jan

6. Adjustment #3 (Prepaid rent)
On January 1st, rent of $5100 was prepaid for January, February, & March.
See Figure 6.8 – Page 226
Rent for 3 months
Per month (1/3 * 5100)
$5100
$1700
Prepaid Rent
Jan
Balance
Jan
Rent Expense
Jan

7. Adjustment #4 (Depreciation-Equipment)
20% per year (Declining Balance method – tax purposes)
See Figure 6.9 – Page 227
This year’s depreciation
Per month (1/12 * 1920)
$1920
$160
Accumulated Depreciation-
Equipment
Jan
Balance 2560
Depreciation Expense-
Equipment
Jan
Equipment
Jan

8. Completing the Worksheet
See Page 227.
Add or subtract the adjustment to create your new total for the account. (balance sheet or income statement)
Net income/loss calculated the same way as before. (Debits > Credits = net loss and vice versa)
- Double underline totals!

9. 8-Column Worksheet (Steps)
Heading
Trial Balance
Data for adjustments (collect)
Adjustments column (total, balance, rule)
Transfer to income statement or balance sheet
Determine Net income/loss
Balance & rule the work sheet.

10. 10 – Column Worksheet Two extra columns added (Adjusted Trial Balance)
Purpose: to ensure ledger accounts still in balance
See Figure 6.10 (Page 230)

11. 10-Column Worksheet (Steps)
Heading
Trial Balance
Data for adjustments (collect)
Adjustments column (total, balance, rule)
Transfer to adjusted trial balance. (recalculate balances where necessary)
Transfer to income statement or balance sheet
Determine Net income/loss
Balance & rule the work sheet.

12. Preparing the Financial Statements
Financial statements are prepared from the work sheet. (Page )
New Expenses (from adjustments) are included in the income statement.
Accumulated Depreciation is shown as a subtraction from Equipment in the fixed asset section of the balance sheet.