What is Accounting Worksheet?
What is Accounting Worksheet?Types of Accounting worksheet, 10 sheet column
The accounting worksheet
What is Accounting Worksheet?Types of Accounting worksheet, 10 sheet column
The accounting worksheet
Introduction
An accountant prepares a scratch pad or worksheet to facilitate the work of adjusting and closing the entries as well as preparing financial statement. So, it is a tool for accountant outside the accounting system. It is not a formal statement in accounting system but merely a rough work of an accountant. Therefore, it may vary in format and is often prepared using pencil so that errors can be easily corrected. The accountants work out the details at the end of the accounting period and get a detail preview of the financial statement using the worksheet.
Meaning of worksheet
A worksheet is a working paper of an accountant. It showed the details of account
An accountant prepares a scratch pad or worksheet to facilitate the work of adjusting and closing the entries as well as preparing financial statement. So, it is a tool for accountant outside the accounting system. It is not a formal statement in accounting system but merely a rough work of an accountant. Therefore, it may vary in format and is often prepared using pencil so that errors can be easily corrected. The accountants work out the details at the end of the accounting period and get a detail preview of the financial statement using the worksheet.
Meaning of worksheet
A worksheet is a working paper of an accountant. It showed the details of account
ing works and adjustment to check their arithmetical accuracy before preparing financial statements. It is also known as extended trial balance and this terminology is quite popular in the British accounting literature.
It is a columnar sheet of paper used in the accounting cycle to facilitate the work of making adjusting anc closing entries and preparing financial statements. It is a working paper, which helps the accountant to assemble all the ledger account balance and adjustment information together on one schedule. In other words, a worksheet is a schedule of data showing the relationship among (i) closing entries (ii) adjusting entries, (iii) adjusted trial balance and (iv) financial statement.
Objective of worksheet
The basis objective of a worksheet is to organize the information needed to prepare financial statement without recording and posting formal adjusting entries. Basic these basis objectives, other objective of a worksheet are:
i. To preview the possible financial statements.
ii. To facilitate the work of making adjusting and closing entries.
iii. To make possible the preparation of interim i.e. monthly or quarterly statements.
iv. To facilitate the analysis and rectification of errors.
Types of worksheet
A worksheet is not a part of the formal accounting records; therefore a fixed type of format is not used to prepare a worksheet. A business form may use the format of work sheet as per its requirement. Generally two types of format are found in practice:
a. 10 column worksheet
b. 12 column worksheet
It is importance to note that 12-column worksheet is needed ot show the information about the profit and loss appropriation account (distribution of dividend, transfer of profit to different funds etc). profit and loss appropriation account is also known as statement of retained earnings.
Similarly, 10-column worksheet is suitable, if there is no any information related with profit and loss appropriation account. In other words, in the absence of any information regarding dividend paid, transfer of profit to general reserve and retained earnings, a company may use 10-column of worksheet.
10-column worksheet
If there is no need to prepare statement of retained earnings or profit and loss appropriation account, a business concern a 10 column worksheet. Generally, a sole proprietorship and partnership form of business concern use such type of format for worksheet. Similarly, in the absence of any information regarding dividend paid and retained earnings, a joint stock company may also use type of format of worksheet. The worksheet must be identified by a heading that consists of the name of the company, the title 'worksheet must be identified by a heading that consist of the name of format of worksheet. The worksheet must be identified by a heading that consist of the name the company, the title 'worksheet' and the period of time converged.
Brief explanation of worksheet
Column 1 account number: in this column, each number of accounts is written in ascending orders.
Column 2 account titles: in this column, various items (names) of accounts given in the list of ledger balance or trial balance are shown individually.
Column 3 trial balance: in this column, amounts of items of ledger balance or trial balance like expenses, income, drawing, assets, capital, reserve and liabilities are recorded by following the rule of trial balance. It is also known as unadjusted trial balance.
Column 4 adjustments: in this column, amounts of adjustments are recorded by following the rule of adjustment entry.
Column 5 adjustment trial balance: this column is the outcome of unadjusted trial balance and adjustments.
Column 6 income statements: in this column, amount of revenue expenses and income are recorded from adjustment trial balance to ascertain net income or net loss.
Column 7 balance sheet column: in this column, amount of assets, drawing, net loss, net income, liabilities, capital, reserves and surplus are separated from the adjusted trial balance and recorded.
Step 1: enter and total the ledger balance in trial balance column
The items of ledger balance or a trial balance are related with revenue expenses, revenue incomes, assets, shareholder equity (owner's fund) and liabilities. Out of these items, assets and revenue expenses are recorded in debt column. Similarly, shareholder equity (owner's fund), liabilities are recorded in credit column. The total of debit and credit column should be equal. If the total of these two columns are not equal, there may be some error in the preparation of account and the error must be detected and rectified before preparing the worksheet. The trial balance which is prepared considering only the ledger balance is also known as unadjusted trial balance.
Step 2: enter and total the adjustment column
An adjustment means information about an additional transaction, which is given outside the trial balance. Adjustments should be considered for accurate opening results i.e. profit or loss and true financial position of the business. Adjustment are recorded on debt and credit columns of adjustments in the worksheet following the rules of adjusting entries and the total of such two columns must be equal to each other.
For the preparation of a worksheet, the following are some important adjustments and their treatment in adjustment columns.
• Closing stock: it is to be shown in debit column of adjustments under the head of 'closing stock' and in the credit column of adjustments under the head of 'income summary account'.
• Outstanding expense: it is to be shown in debit column of the related expenses and in credit column of outstanding expenses.
• Prepaid expenses: it is to be shown in credit column of related expenses and in debit column of prepaid expenses.
• Accured income: it is to be shown in credit column of related income and in debit column of accrued income.
• Expired expenses: it is to be show in credit column of prepaid expenses and debit column of expired expenses.
• Income earned: it is to be shown in debit column of unearned income and credit column of income earned.
• Depreciation: it is to be shown in credit column of concerned assets and debit column of depreciation expenses.
• Appreciation: it is to be shown in debit column of related assets and credit column of appreciation income.
• Further bed debts and reserve for bad debt: they are to be shown in credit column of sundry debtors or account receivable and debit column of further bad or reserve for bad debt.
• If value of assets: expenses and losses are increased value should be should be debit column of related items and if they are decreased, such decreased value should be shown in credit column.
• If value of capital: liabilities and reserve and surplus are increased, they are to be shown in credit column of related items but if decreased, they are to be shown in debit column.
Step 3: complete the adjusted trial balance column
It is the column of trial balance and adjustments column. The debit column of trial balance and debit column of adjustments are added and the balance is shown in debit column of adjusted trial balance. Similarly, credit column of trial balance and credit column of adjustment are added and shown in credit column of adjsutmeted trial balance. But debit column of trial balance and credit column of adjustments and credit of trial balance and debit column of adjustment are subtracted from each other and remaining balance is shown in debit or credit column of adjusted trial balance.
Step 4: complete the income statement column
Income statement column shows the detailed revenue income and revenue expenses of an accounting period, it is prepared on the basis of adjusted trial balance. All reserve income are shown in credit column statement from the credit column of adjusted trial balance. Similarly, all revenue expenses are shown in debit column of income statement from the debt. Column of adjusted trial balance. Then after, if the total of credit column is more, the balancing figure in debit column is known as net income. But if the total of debt column is more, the balancing figure in credit column is known as net loss.
Step 5: complete the balance sheet
Balance sheet is a statement of assets and liabilities. It shown assets and drawing in the debit column from the debit column of adjusted trial balance and if there is net loss in the credit column of income statement that is also shown in debit column. Similarly, capital, reserve and various liabilities are shown in credit column from the credit column of adjusted trial balance various liabilities are shown in credit column from the credit column of adjusted trial balances and if there is net income in the debit column of income statement that is also shown in credit column of balance sheet. After adjusting all assets, drawing, capital, liabilities, reserve and surplus, net income and net loss, the debit and credit column of balance sheet should be equal to each other.
12-column worksheet
If there is information regarding statement of retained earnings or profit and loss appropriation account, an extra column for statement for retained will be added and there will be a 12 column worksheet. Generally, in the case of a joint stock company such type of formed is used for worksheet.
Additional two columns of debit and credit of statement of retained earnings will be added in 10-column worksheet to prepare the 12-column work sheet. These columns show opening balance of retained or profit and loss appropriation account, net profit after tax during the year and distribution of total available profit among the shareholders in the tax during the year from the debit column of adjustment is recorded in credit Colum. After this, total is done and balancing figure is determined. If credit column is heavy, the balancing figure will be put in debit column, which will be appeared again in credit column of balance sheet. It's just reverse, if debit column is heavier than credit column and that is shown in debit column of balance sheet, the balancing figure is put in credit column which appears again in the debit column of balance sheet.
Income statement
Income statement contains expenses and revenue from the worksheet. It provides the information about cost of goods sold, operating expenses, non operating expenses, operating income and non-incomes. The main objectives of preparing incomes statement is to know about net income or net loss of an accounting year.
Statement of retained earning
It is prepared after the preparation of income statement. Statement of retained earning provides the information regarding beginning balance of retained earnings, net profit after tax during the year, dividend paid, profit transfer to reserve and ending balance of relined earnings. All above-mentioned items are recorded from the worksheet.
Financial statements as per company act
The format of financial statements as per company act, 2063 include the following items.
a. Income statement and
b. Balance sheet
Income statement
Income statement shows the detailed revenue incomes and expenses. It is prepared to know operating results of the company. Trading account and profit and loss account do not provides all the required information to the users and income statement provides the required information to the users. The format of income statement as per company act, 2063 is as follows.
Balance sheet
The balance sheet provides the information regarding financial positions of the company includes the following items.
• The assets and liabilities of the company
• The sources and amount of fund used.
Balance sheet gives information about resources of the company possesses and claims over the resources. The presentation of assets and liabilities in the balance sheet will be useful to investors and creditors if presented in vertical format. The format of balance sheet as per company act 2063 as follows.
Closing entries
Closing entries are made only after preparing financial statements for the period. These entries close all revenues and expenses accounts by transferring their balance to a clearing account called income summary (income statement) and then to retained earnings or capital. Generally an accountant of an organization preparer closing entries directly from the work sheet.
First entry:
In the first closing entry, all items showing on credit column of the income statement of worksheet are debited and income summary account is credited.
Second entries
The second credits all items appearing on debit column of income statement and debits incomes summary account.
Third entry:
The third entry is concerned with the balancing figure in the income summary account which is transferred to retain earning account or capital account.
a. If credit is greater than debit column in the income summary account, the differences is considered as net income or it is also known credit balance.
b. But, if debit column greater than column, the difference is considered as net loss or it is also knows debit balance of income summary account.
Fourth entry:
The forth entry closes the appropriation of profit account balance such as dividend paid to the retained earning account by debiting retained earnings and credit dividends.
The basis objective of a worksheet is to organize the information needed to prepare financial statement without recording and posting formal adjusting entries. Basic these basis objectives, other objective of a worksheet are:
i. To preview the possible financial statements.
ii. To facilitate the work of making adjusting and closing entries.
iii. To make possible the preparation of interim i.e. monthly or quarterly statements.
iv. To facilitate the analysis and rectification of errors.
Types of worksheet
A worksheet is not a part of the formal accounting records; therefore a fixed type of format is not used to prepare a worksheet. A business form may use the format of work sheet as per its requirement. Generally two types of format are found in practice:
a. 10 column worksheet
b. 12 column worksheet
It is importance to note that 12-column worksheet is needed ot show the information about the profit and loss appropriation account (distribution of dividend, transfer of profit to different funds etc). profit and loss appropriation account is also known as statement of retained earnings.
Similarly, 10-column worksheet is suitable, if there is no any information related with profit and loss appropriation account. In other words, in the absence of any information regarding dividend paid, transfer of profit to general reserve and retained earnings, a company may use 10-column of worksheet.
10-column worksheet
If there is no need to prepare statement of retained earnings or profit and loss appropriation account, a business concern a 10 column worksheet. Generally, a sole proprietorship and partnership form of business concern use such type of format for worksheet. Similarly, in the absence of any information regarding dividend paid and retained earnings, a joint stock company may also use type of format of worksheet. The worksheet must be identified by a heading that consists of the name of the company, the title 'worksheet must be identified by a heading that consist of the name of format of worksheet. The worksheet must be identified by a heading that consist of the name the company, the title 'worksheet' and the period of time converged.
Brief explanation of worksheet
Column 1 account number: in this column, each number of accounts is written in ascending orders.
Column 2 account titles: in this column, various items (names) of accounts given in the list of ledger balance or trial balance are shown individually.
Column 3 trial balance: in this column, amounts of items of ledger balance or trial balance like expenses, income, drawing, assets, capital, reserve and liabilities are recorded by following the rule of trial balance. It is also known as unadjusted trial balance.
Column 4 adjustments: in this column, amounts of adjustments are recorded by following the rule of adjustment entry.
Column 5 adjustment trial balance: this column is the outcome of unadjusted trial balance and adjustments.
Column 6 income statements: in this column, amount of revenue expenses and income are recorded from adjustment trial balance to ascertain net income or net loss.
Column 7 balance sheet column: in this column, amount of assets, drawing, net loss, net income, liabilities, capital, reserves and surplus are separated from the adjusted trial balance and recorded.
Step 1: enter and total the ledger balance in trial balance column
The items of ledger balance or a trial balance are related with revenue expenses, revenue incomes, assets, shareholder equity (owner's fund) and liabilities. Out of these items, assets and revenue expenses are recorded in debt column. Similarly, shareholder equity (owner's fund), liabilities are recorded in credit column. The total of debit and credit column should be equal. If the total of these two columns are not equal, there may be some error in the preparation of account and the error must be detected and rectified before preparing the worksheet. The trial balance which is prepared considering only the ledger balance is also known as unadjusted trial balance.
Step 2: enter and total the adjustment column
An adjustment means information about an additional transaction, which is given outside the trial balance. Adjustments should be considered for accurate opening results i.e. profit or loss and true financial position of the business. Adjustment are recorded on debt and credit columns of adjustments in the worksheet following the rules of adjusting entries and the total of such two columns must be equal to each other.
For the preparation of a worksheet, the following are some important adjustments and their treatment in adjustment columns.
• Closing stock: it is to be shown in debit column of adjustments under the head of 'closing stock' and in the credit column of adjustments under the head of 'income summary account'.
• Outstanding expense: it is to be shown in debit column of the related expenses and in credit column of outstanding expenses.
• Prepaid expenses: it is to be shown in credit column of related expenses and in debit column of prepaid expenses.
• Accured income: it is to be shown in credit column of related income and in debit column of accrued income.
• Expired expenses: it is to be show in credit column of prepaid expenses and debit column of expired expenses.
• Income earned: it is to be shown in debit column of unearned income and credit column of income earned.
• Depreciation: it is to be shown in credit column of concerned assets and debit column of depreciation expenses.
• Appreciation: it is to be shown in debit column of related assets and credit column of appreciation income.
• Further bed debts and reserve for bad debt: they are to be shown in credit column of sundry debtors or account receivable and debit column of further bad or reserve for bad debt.
• If value of assets: expenses and losses are increased value should be should be debit column of related items and if they are decreased, such decreased value should be shown in credit column.
• If value of capital: liabilities and reserve and surplus are increased, they are to be shown in credit column of related items but if decreased, they are to be shown in debit column.
Step 3: complete the adjusted trial balance column
It is the column of trial balance and adjustments column. The debit column of trial balance and debit column of adjustments are added and the balance is shown in debit column of adjusted trial balance. Similarly, credit column of trial balance and credit column of adjustment are added and shown in credit column of adjsutmeted trial balance. But debit column of trial balance and credit column of adjustments and credit of trial balance and debit column of adjustment are subtracted from each other and remaining balance is shown in debit or credit column of adjusted trial balance.
Step 4: complete the income statement column
Income statement column shows the detailed revenue income and revenue expenses of an accounting period, it is prepared on the basis of adjusted trial balance. All reserve income are shown in credit column statement from the credit column of adjusted trial balance. Similarly, all revenue expenses are shown in debit column of income statement from the debt. Column of adjusted trial balance. Then after, if the total of credit column is more, the balancing figure in debit column is known as net income. But if the total of debt column is more, the balancing figure in credit column is known as net loss.
Step 5: complete the balance sheet
Balance sheet is a statement of assets and liabilities. It shown assets and drawing in the debit column from the debit column of adjusted trial balance and if there is net loss in the credit column of income statement that is also shown in debit column. Similarly, capital, reserve and various liabilities are shown in credit column from the credit column of adjusted trial balance various liabilities are shown in credit column from the credit column of adjusted trial balances and if there is net income in the debit column of income statement that is also shown in credit column of balance sheet. After adjusting all assets, drawing, capital, liabilities, reserve and surplus, net income and net loss, the debit and credit column of balance sheet should be equal to each other.
12-column worksheet
If there is information regarding statement of retained earnings or profit and loss appropriation account, an extra column for statement for retained will be added and there will be a 12 column worksheet. Generally, in the case of a joint stock company such type of formed is used for worksheet.
Additional two columns of debit and credit of statement of retained earnings will be added in 10-column worksheet to prepare the 12-column work sheet. These columns show opening balance of retained or profit and loss appropriation account, net profit after tax during the year and distribution of total available profit among the shareholders in the tax during the year from the debit column of adjustment is recorded in credit Colum. After this, total is done and balancing figure is determined. If credit column is heavy, the balancing figure will be put in debit column, which will be appeared again in credit column of balance sheet. It's just reverse, if debit column is heavier than credit column and that is shown in debit column of balance sheet, the balancing figure is put in credit column which appears again in the debit column of balance sheet.
Income statement
Income statement contains expenses and revenue from the worksheet. It provides the information about cost of goods sold, operating expenses, non operating expenses, operating income and non-incomes. The main objectives of preparing incomes statement is to know about net income or net loss of an accounting year.
Statement of retained earning
It is prepared after the preparation of income statement. Statement of retained earning provides the information regarding beginning balance of retained earnings, net profit after tax during the year, dividend paid, profit transfer to reserve and ending balance of relined earnings. All above-mentioned items are recorded from the worksheet.
Financial statements as per company act
The format of financial statements as per company act, 2063 include the following items.
a. Income statement and
b. Balance sheet
Income statement
Income statement shows the detailed revenue incomes and expenses. It is prepared to know operating results of the company. Trading account and profit and loss account do not provides all the required information to the users and income statement provides the required information to the users. The format of income statement as per company act, 2063 is as follows.
Balance sheet
The balance sheet provides the information regarding financial positions of the company includes the following items.
• The assets and liabilities of the company
• The sources and amount of fund used.
Balance sheet gives information about resources of the company possesses and claims over the resources. The presentation of assets and liabilities in the balance sheet will be useful to investors and creditors if presented in vertical format. The format of balance sheet as per company act 2063 as follows.
Closing entries
Closing entries are made only after preparing financial statements for the period. These entries close all revenues and expenses accounts by transferring their balance to a clearing account called income summary (income statement) and then to retained earnings or capital. Generally an accountant of an organization preparer closing entries directly from the work sheet.
First entry:
In the first closing entry, all items showing on credit column of the income statement of worksheet are debited and income summary account is credited.
Second entries
The second credits all items appearing on debit column of income statement and debits incomes summary account.
Third entry:
The third entry is concerned with the balancing figure in the income summary account which is transferred to retain earning account or capital account.
a. If credit is greater than debit column in the income summary account, the differences is considered as net income or it is also known credit balance.
b. But, if debit column greater than column, the difference is considered as net loss or it is also knows debit balance of income summary account.
Fourth entry:
The forth entry closes the appropriation of profit account balance such as dividend paid to the retained earning account by debiting retained earnings and credit dividends.
Balance sheet is not an account. It is a financial statement which is prepared with ledger balances. Ledger balances are not transferred to balance sheet.
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