The Worksheet. It is an instrument that is used in accounting , an extra- accounting draft, where the information is summarized before operating in the Books and is of great help in formulating the Financial Statements .
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- 1 Considerations of the Worksheets.
- 2 Form and Content.
- 3 Mechanism for its elaboration
- 1 Trial Balance
- 2 Settings
- 3 Adjusted Trial Balance
- 4 Cost of Sale
- 5 Profits and Losses
- 6 Balance Sheet
- 4 Sources
Considerations of the Worksheets.
- This draft facilitates the grouping, analysis and ordering of all the accounts that make up the Accounting, as well as it allows to formulate the Adjustment and Closing Transactions before entering them in the Daily Book . It also represents a guide that allows the Accountant to preparation of the financial statements .
- This Worksheet is not mandatory to carry, but most companies use it due to the great benefit it represents; it generally consists of 12 columns.
Form and Content.
- The structure of the Worksheet is as follows: The large space (on the left) allows you to write down the name of the accounts, then a series of columns follow (12 in total) that we will use, allocating 2 columns for each of the following concepts:
- – Trial Balance
- – Settings
- – Adjusted Trial Balance
- – Cost of sale
- – Gains and Losses
- – Balance Sheet.
Mechanism for its elaboration
- The first two columns will be used to formulate the Trial Balance with the balances shown by the General General Accounts at the closing date; This Balance is known as Unadjusted Trial Balance, since some accounts do not show the correct balance that they should have as of this date, and therefore the corresponding adjustment entries must be made.
- Two columns are assigned to the adjustments, one for the Debt and the other for the Credit; here we will pass the adjustments that we consider necessary.
- The Trial Balance above helps us a lot in formulating these adjustments; by analyzing the accounts we can determine which of them need to be adjusted; Of course, we must look for other information that this Balance will not provide us; For example: if the Prepaid Insurance Account appears , we have to determine on which date the Insurance Policy was acquired in order to calculate what the [Insurance Expense]] of the Fiscal Year is and proceed to formulate the adjustment.
- If Building Assets , Furniture, Vehicles Fixed Assets appear , we have to know by which method they are depreciating and determine what the Depreciation Expense of each one of them that corresponds to the Fiscal Year, in order to formulate the necessary adjustments.
- When we proceed to pass these adjustments to the Worksheet, we have to be aware of whether or not the accounts that are loaded or paid appear in the Trial Balance. If the accounts that are loaded and the accounts that are credited appear in the Trial Balance, we will enter the corresponding amounts in the adjustments column on the respective lines; If they do not appear, we add them at the bottom and we formulate the corresponding charges or payments.
- Once all the adjustments have been made, we add the Debit and Credit columns and they must be the same, since in each Adjustment Seat there must be a balance between charges and credits.
- A healthy practice is to place a small number on each account that is being adjusted, pointing out the adjustment number to which it corresponds; This helps us to specify any mistake made at any time.
Adjusted Trial Balance
- Here will be the accounts: those that deserved adjustment with the adjusted balance that corresponds to them, and those that there was no need to adjust them with the balance that they bring. We add the columns of Debit and Credit and there must be a balance between them. This Adjusted Trial Balance will be the basis for formulating the Financial Statements.
Cost of sale
- We will use 2 columns for the determination of the Cost of Sale and here will go solely and exclusively the necessary accounts for its determination.
- The Debtor Accounts will be placed in the Debt and the Creditors will place them in the Credit, including here the Final Inventory of Merchandise necessary for the determination of the Cost of Sale. The Cost of Sales results from the difference between the totals of the charges minus the total of the credits. The Cost of Sale will always be of a debtor nature and we will place it in the Credit column to balance the columns and proceed to close them.
Earnings and loses
- Here we place all the Expense Accounts: both Expense and the Cost of Sale determined in the previous columns, these will go by the Debt and all the Income Accounts we will place them by Credit. We add the Debt column and the Credit column and the difference between them will give us the profit or loss of the Exercise:
- Once the Profit or Loss of the Exercise has been determined, we place this amount in the opposite direction, simply to square the columns and proceed to close them; example if it gives us the Utility (the Income exceeds the Expenses), we will place this Utility for the Debt to square the columns.
- Here it corresponds to all the Assets (Debt), Liabilities and Capital (Credit) Accounts and to all Valuation and Order Accounts. We must be aware of including the Final Inventory of Merchandise that constitutes a Current Assets as of this date and the Profit or Loss of the Exercise that will increase or decrease the Capital; if it is Profit the Capital increases therefore it will go for the Credit, and if it is Loss the Capital decreases, therefore it will go for the Debt. We add the Debt column and the Credit column and these must be the same.
- Once this Worksheet is finished, corrected and analyzed, being sure of the effectiveness of the work, this draft allows us to correctly carry out the Adjustment and Closing Transactions in the General Journal and then we will formulate the Classified Financial Statements, using this draft guide.