BAF3M-U4-L03 · BAF3M
The accounting worksheet
Learning goals
- Complete adjustment and adjusted-trial-balance columns.
- Extend adjusted balances to income-statement or balance-sheet columns.
- Calculate net income as the worksheet balancing amount.
- Explain why a worksheet is a working paper, not a journal or formal statement.
Prerequisite check
Calculate: Supplies $900 before adjustment, $250 counted. Prepaid Insurance $1,200 before adjustment, $900 unexpired. What are the two adjustments?
Vocabulary
- Worksheet: an internal working paper that organizes trial balance, adjustments, adjusted balances, and statement columns.
- Adjusted trial balance: ledger balances after all period-end adjustments are posted or reflected.
- Extension: placing an adjusted balance in its appropriate statement column.
- Income-statement columns: revenue and expense balances.
- Balance-sheet columns: assets, liabilities, capital, and drawings in the common sole-proprietor worksheet format.
- Balancing amount: net income or loss entered so both statement column pairs agree.
Core idea
The worksheet is a controlled transfer grid. Move one account row at a time and prove each pair of columns before moving on. It helps prepare entries and statements but does not itself update the ledger.
Why this treatment makes sense
A complete cycle has many transfers. The worksheet places the unadjusted amount, change, adjusted amount, and statement destination on one row. This makes a skipped account or reversed adjustment easier to see.
A repeatable method
- Copy the trial balance and prove its totals.
- Enter lettered adjustments with equal debit and credit totals.
- Combine each row to obtain its adjusted balance.
- Prove adjusted debit = adjusted credit.
- Extend revenue/expenses to income-statement columns.
- Extend assets, liabilities, capital, and drawings to balance-sheet columns.
- Difference between income columns is net income or loss; insert it in both column pairs on opposite sides.
- Prepare journal adjustments and formal statements from the supported work.
Worked example
Paper Trail Studio has an unadjusted trial balance of $23,800 on each side. Relevant unadjusted balances include Supplies $900 Dr, Prepaid Insurance $1,200 Dr, Unearned Revenue $900 Cr, and Service Revenue $7,400 Cr. Three adjustments are needed:
- supplies used $650;
- insurance expired $300;
- $400 of Unearned Revenue earned.
Selected adjusted and extension columns:
| Account | Adjusted debit | Adjusted credit | Income stmt debit | Income stmt credit | Balance sheet debit | Balance sheet credit |
|---|---|---|---|---|---|---|
| Cash | $9,000 | — | — | — | $9,000 | — |
| Accounts Receivable | 2,400 | — | — | — | 2,400 | — |
| Supplies | 250 | — | — | — | 250 | — |
| Prepaid Insurance | 900 | — | — | — | 900 | — |
| Equipment | 8,000 | — | — | — | 8,000 | — |
| Accounts Payable | — | $1,500 | — | — | — | $1,500 |
| Unearned Revenue | — | 500 | — | — | — | 500 |
| Owner, Capital | — | 14,000 | — | — | — | 14,000 |
| Owner, Drawings | 600 | — | — | — | 600 | — |
| Service Revenue | — | 7,800 | — | 7,800 | — | — |
| Rent Expense | 1,200 | — | 1,200 | — | — | — |
| Wages Expense | 500 | — | 500 | — | — | — |
| Supplies Expense | 650 | — | 650 | — | — | — |
| Insurance Expense | 300 | — | 300 | — | — | — |
Adjusted debits and credits are both $23,800.
Income-statement expenses total $2,650; revenue is $7,800; net income is $5,150. Add net income to the income-statement debit column and balance-sheet credit column. Each income pair becomes $7,800, and each balance-sheet pair becomes $21,150.
Reasonableness: assets $20,550 = liabilities $2,000 + ending capital ($14,000 + $5,150 − $600 = $18,550).
Journal, ledger, and statement connection
The worksheet can help prepare adjustments, but the adjustments still require journal entries and posting. Formal statements use adjusted amounts. Closing entries later use the revenue, expense, and drawings balances—not the worksheet balancing line as if it were a cash transaction.
Common mistakes
- Treating the worksheet as a formal statement.
- Forgetting to journalize and post the adjustments.
- Extending Drawings to the income-statement column.
- Extending Accumulated Depreciation to a debit column.
- Putting net income on the same side in both column pairs.
- Forcing balance without tracing a row.
Guided practice
Adjusted balances are Revenue $11,600; Wages Expense $4,200; Rent Expense $2,100; Insurance Expense $500; Cash $8,000; A/R $3,500; Supplies $1,300; Equipment $12,000; A/P $2,700; Capital $15,000; Drawings $1,000; Bank Loan $3,300.
- Extend each account.
- Calculate net income.
- Prove the balance-sheet equation after capital updates.
Independent practice
An unadjusted worksheet includes Supplies $1,100, Prepaid Rent $2,400, Service Revenue $14,000, total other expenses $8,200, and all other permanent balances already equal. A count shows Supplies $350; one of four prepaid rent months has expired; $900 service revenue is earned from a customer deposit already in Unearned Revenue.
Prepare the three adjustments, calculate adjusted revenue and total expenses, and find net income.
Self-check and solutions
Guided practice: Revenue goes to income-statement credit; expenses $6,800 go to income-statement debit; net income = $4,800. Cash, A/R, Supplies, Equipment, and Drawings extend to balance-sheet debit; A/P, Loan, and Capital to balance-sheet credit. Ending capital = $15,000 + $4,800 − $1,000 = $18,800. Assets $24,800 = liabilities $6,000 + ending capital $18,800. Worksheet balance-sheet columns also prove: debit balances $25,800, including Drawings $1,000, equal credits $21,000 plus net income $4,800.
Independent practice: Supplies used = $1,100 − $350 = $750. Rent expired = $2,400 ÷ 4 = $600. Earned deposit = $900. Adjustments: Dr Supplies Expense/Cr Supplies $750; Dr Rent Expense/Cr Prepaid Rent $600; Dr Unearned Revenue/Cr Service Revenue $900. Adjusted revenue $14,900. Adjusted expenses = $8,200 + $750 + $600 = $9,550. Net income = $5,350.
Retrieval practice
List the worksheet column pairs and the accounts that reach each statement pair. Explain where net income is entered and why.
Exam-style application
Income-statement columns show debit $18,400 and credit $15,900. Identify the result and show the two worksheet placements.
Answer outline: Expenses exceed revenue, so net loss = $2,500. Enter $2,500 in the income-statement credit column to balance it and in the balance-sheet debit column because the loss reduces equity. Then prove both pairs.
Lesson summary
The worksheet organizes transfers and exposes breaks, but evidence and journal posting still control the books. Prove each column pair and never use a balancing amount to hide incomplete inputs.