Adjusting the Books-

How to prepare Worksheets in

accounting?
Adjusting the Books
• An adjusting entry is recorded at the end
of the accounting period to bring an asset
or liability account and revenue or
expense balance to its
proper amount.
 Adjustments

Prepaid
Depreciation
Expenses
Do
Supplies Building adjustment
entries
Prepaid
Rent
Truck only for
the
Prepaid
Insurance
Equipment
following
accounts!
Machinery
Items paid for in advance of receiving their benefits
Office supplies-current assets-unused
When used, it is no longer an asset-change to
expense

Prepaid Expenses
• Entries are made to
record the conversion of
prepaid assets to
expenses
• To correct account
balances for the balance
sheet and to record the
appropriate expense for
the period on the income
statement
• These entries=adjusting
entries

Prepaid Expenses
Prepaid Rent
• Rental lease:
• Rent of $1700 a month
• Must be paid in advance for three
months
• April 1: cheque for $5100 is issued in
payment of April, May and June rent.

April May June

Prepaid Rent

• Rent Expense is not debited

• Prepaid Rent is debited

Prepaid Rent

• End of April:

• Should Prepaid Rent be shown as

a current asset with a value of
$5100?
Prepaid Rent
• After one month: $1700 of asset
Prepaid Rent has been used
• Value of prepaid rent must be
reduced ($5100-1700=$3400)
$1700 $1700 $1700

April May June

 Prepaid Rent

• Value of prepaid rent must be reduced

($5100-1700=$3400)
• $1700 rent used record expense
• Adjusting entry
 Prepaid Rent

• Adjusting entry

Apr.30 Rent Expense 1700

Prepaid Expense 1700
To record one month’s Rent Expense.
What is a Worksheet?
• A worksheet is a large sheet of accounting
paper used to organize data in the
preparation of financial statements.

Income Statement Balance Sheet

Purpose of Work Sheets
•Its is not a formal statement provided for
Management Business Owner Investors
Purpose of Work Sheets
•Its is only for the Accountant!
Purpose of Work Sheets

• To discover and eliminate errors before

they become part of permanent records.

• It represents a rough draft of the work

completed at the end of the accounting
cycle
Steps in Preparing a Work Sheet
1. Write a heading

2. Record the trial balance

3. Transfer the balance sheet items

4. Transfer the income statement items

5. Complete the income statement section

6. Complete the Balance Sheet

7. Rule the worksheet

Step 1: Write the Heading
The heading consist of three parts:

• Business Name (Who?)

• Work Sheet (What?)
• For the month ended ……
(When?)
 Step 2: Record the Trial Balance
Mr. Peter’s Sports Club (Who?)
Work Sheet (What?)
For the month ended November 30, 2011 (When?)

Account Title Acc. Trial Balance Income Statement Balance Sheet

NO.
Debit Credit Debit Credit Debit Credit

Cash 100 7800

Accounts 101 2600

Receivable

Record balances from all

ledger accounts.
ACTIVITY #1
• Question: What three items of information
are included in the heading?

• Fill out the heading of your worksheet

template!

• Mr. Peter’s Sports Club-For the month

ended November 2011- Work Sheet
Step 3: Transfer the Balance Sheet Items
• Transfer Assets, Liabilities and Owner’s
Equity from the trial balance to the balance
sheet section.
Mr. Peter’s Sports Club (Who?)
Work Sheet (What?)
For the month ended November 30, 2011 (When?)

Account Title Acc. Trial Balance Income Statement Balance Sheet

NO.
Debit Credit Debit Credit Debit Credit

Cash 100 7800

7800

Accounts 101 2600

Receivable 2600
Step 4: Transfer the Income Statement Items
• Transfer Revenue and Expense accounts
from the trial balance to the income
statement section.
Mr. Peter’s Sports Club (Who?)
Work Sheet (What?)
For the month ended November 30, 2011 (When?)
Account Title Acc. Trial Balance Income Statement Balance Sheet
NO.
Debit Credit Debit Credit Debit Credit
Cash 100 7800
Accounts 101 2600 7800
Receivable
2600
Members Fees 400 12 530
12 530
Sports Equipment 401 560
Rental
560
ACTIVITY #2
• Question: What type of accounts do you
have to transfer to the balance sheet
section?
• Question: What type of accounts do you
have to transfer to the income statement
section?

• Transfer the appropriate accounts from

the trial balance to the balance sheet and
income statement section!
Step 5: Complete the Income Statement Section

• Determine net income or net loss.

• Rule a single line and add the income statement

debit and credit columns.

• Write the totals below the single line.

ACTIVITY #3
• Question: How do you determine the net
income or net loss of the income statement?

• Calculate the debit and credit total and

compare your result with your partner!
Step 5: Complete the Income Statement Section

• Determine the difference between

the debit and credit columns.
• Subtract the debit total (expenses)
from the credit total (revenue).
• Write the difference on the smaller
side.

ACTIVITY #4
Step 5: Complete the Income Statement Section

Net Income: Credit is higher than debit

Net Loss: Debit is higher than credit

Step 5: Complete the Balance Sheet

• Rule a single line and total the columns in the

balance sheet section.
• Enter the net income amount below the total of
the credit column of the balance sheet section.
• The net income represents the increase to the
owner’s equity for the period.
Step 5: Complete the Balance Sheet

• Enter the net loss amount below the total of the

debit column of the balance sheet section.
• The net loss represents the decrease to the
owner’s equity for the period.
 • Rule double lines
below the totals to
indicate
completion and
proof that the work
is mathematically
correct.

Step 6: Rule the Work

Sheet