Definition of an Accounting Worksheet
An accounting worksheet is a ledger sheet that lists all the balances of each account a business has on a certain date. An accounting worksheet is done at the end of an accounting period, and it is used to make adjustments to accounting entries, to close entries and finally to prepare financial statements.
Unadjusted Trial Balance
When a company's accounting period ends, a worksheet is produced. This is done on a 10-column ledger sheet, and each account is listed individually on the left-hand side. The first two columns of numbers list each account's balance. Some will be debits, placed on the left, and some will be credits, placed on the right. The order in which the accounts are listed are: assets, liabilities, equity, revenue and expenses. Each column is totaled and the amounts are listed on the very bottom. The debit and credit columns should balance out by being the same number.
Adjustments
The next two columns of numbers represent the debits and credits for adjusting entries. Adjusting entries are made to adjust certain accounts and bring them up to date. Adjusting entries include things such as inventory, supplies, insurance, depreciation, interest expenses and interest incomes. An example of an adjusting entry would be if the Supplies account was listed as $300, but when an actual count showed there is only $250 of supplies, an entry would be made to make up this difference. A $50 debit would be placed under Supplies Expense and a $50 credit would be placed under Supplies. The adjustment columns are totaled and balanced out. The amounts should equal.
Trial Balance
After the adjustments are made, all of the account balances are updated. The new totals are put in the next two columns of the ledger. If no adjustment was made to an account, the account balance simply transfers over. If an adjustment was made to an account, the new balance transfers over. When the trial balance is complete and balanced, the amounts are placed in either of the next two columns depending on what they are.
Income Statement
The next two columns represent accounts that are represented on the Income Statement. An Income Statement is a financial document that shows all revenues and all expenses. Any revenue and expense accounts are to be placed on these columns. An Income Statement is generated based on this information, and this statement shows the company's net income or net loss for the period.
Balance Sheet
The remaining account balances are to be transferred to the last two columns, which are balance sheet accounts. All asset, liability, and equity accounts are to be placed in these two columns. A Balance Sheet is then generated that shows the company's assets, liabilities and equity for that date.
How to Prepare an Accounting Worksheet
Accountants often use worksheets as a preliminary step to preparing the financial statements and consolidating a great deal of information. The worksheet is a tool for creating a trial balance and an adjusted trial balance. It uses all of the accounts contained in the company's accounting records, records adjusting entries and calculates the final numbers to enter on the financial statements. Creating a worksheet is an optional step and is most often used in manual accounting systems. A worksheet may be used as an analysis tool in a computerized or manual accounting system.
Instructions
Preparing the Worksheet
- Format the worksheet. Starting at the first line near the top right of the page, list each of the accounts from the company's complete chart of accounts. The next column is considered the first column of the worksheet. Label the first and second columns "Trial Balance." Label the third and fourth columns "Adjustments." Label the fifth and sixth columns "Adjusted Trial Balance." Label the seventh and eighth columns "Income Statement." Label the ninth and 10th columns "Balance Sheet."
- Prepare the Trial Balance columns. Write the current balance of each account under the columns labeled Trial Balance. If the account has a debit balance, write the balance in the left column. If the account has a credit balance, write the balance in the right column. Add the total of debits and credits at the bottom. They should be equal. Add the total of debits and credits at the bottom. They also should be equal.
- Prepare the Adjustments columns. Write the adjusting entry transaction amounts under the columns labeled Adjustments. If the transaction amount was a debit, then write the amount in the left column. If the transaction amount was a credit, then write the amount in the right column. Add the total of debits and credits at the bottom. Again, they should be equal
- Prepare the Adjusted Trial Balance columns. Write the adjusted balance under the columns labeled Adjusted Trial Balance. The adjusted balance is calculated by taking the amount from the Trial Balance column and adding the adjustment from the Adjustments columns. A debit balance is increased by a debit adjustment. A debit balance is decreased by a credit adjustment. If a debit balance is decreased to less than zero, it becomes a credit. The same philosophy applies to credit balances. If the adjusted balance is a debit balance, write the balance in the left column. If the adjusted balance is a credit balance, write the balance in the right column. Add the total of debits and credits at the bottom. The totals should be equal.
- Prepare the Income Statement columns. Revenue and expense accounts are the Income Statement accounts. The balances from these accounts should be carried over from the Adjusted Trial Balance columns. If it was a debit balance, it should remain a debit balance. Add the total of debits and credits at the bottom. The columns will not be equal. This difference is the net income, and it should be added to the column at the bottom to make the two columns equal.
- Prepare the Balance Sheet columns. Assets, liabilities and equity accounts are the Balance Sheet accounts. The balances from these accounts should be carried over from the Adjusted Trial Balance columns. If it was a debit balance, it should remain a debit balance. Add the total of debits and credits at the bottom. The columns will not be equal. This difference matches the difference from the Income Statement columns and is the net income. It should be added to the column at the bottom to make the two columns equal.
