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12 Columns Worksheet: Journal Entries for Adjustments, Problem and Solution

Arjun EP

Published on: February 8, 2021

Concept of Worksheet

The worksheet is not a formal step in the accounting cycle; it is the rough work.

It is the paperwork.

It is prepared by an accountant regarding adjustment entries.

Therefore, it is called a scratch pad.

It is prepared at end-of-period for the preview of the financial statements.

The worksheet is also known as extended trial balance (ETB).

This terminology is quite popular in British Accounting Literature.

Twelve Columns Worksheet

If there is any transaction related to profit and loss account appropriation account (retained earning account), it becomes 12 column cash book; such as:

In trial balance:	In adjustments:
Profit and loss account appropriation account	Proposed dividend
Net profit last year	General reserve
Provision for taxation last year	Capital reserve
Tax paid of last year etc.	Dividend equalization fund
	Asset replacement fund etc.

Journal Entries for Adjustment

Bad debts on debtors or credit sales		Amortization/write off on Intangible assets
Bad debts account	Dr	Amortization/ write off account		Dr
To Debtors (B/R, A/R) account		To Intangible assets account
(Being – bad debts on debtors)		(Being – intangible/fictitious assets write off)
Provision for bad debts		Advance income received		Dr
Provision for bad debts account	Dr	Income^{^} (by name) account
To Debtors (B/R, A/R) account		To Advance income^{^} account
(Being – provision for bad debts on debtors)		(Being – income received in advance)
Bad debts received which was written off		Expenses expired from advance
Cash/bank account	Dr	Expenses expired account		Dr
To Bad debt (recovered) account		To Advance expenses account
(Being – bad debts received from debtors)		(Being – expenses expired from advance)
Depreciation charged on assets		Goods lost by fire or theft
Depreciation account	Dr	Insurance claim account		Dr
To Assets (by name) account		Profit and loss account		Dr
(Being – depreciation charged on assets)		To Purchase account
		(Being – goods destroyed by fire)
Appreciation on assets		Closing stock
Assets (by name) account	Dr	Closing stock account		Dr
To Appreciation account		To Trading account
(Being – appreciation on assets)		(Being – closing stock recorded)
Expenses outstanding, payable or due		Proposed dividend
Expenses* (by name) account	Dr	P&L appropriation account	Dr
To Outstanding expenses* account		To Proposed dividend account
(Being – expenses due, payable, outstanding)		(Being – proposed dividend payable)
Prepaid/advance expenses paid		Provision for tax
Prepaid expenses^# account	Dr	P&L account	Dr
To Expenses^#		To Provision for tax account
(Being – expenses paid in advance)		(Being – tax payable)
Accrued income (income earned but not received)		Transfer to reserve and fund
Accrued Income⁺ account	Dr	P&L appropriation account	Dr
To Income⁺ account		To General/capital reserve
(Being – income earned but not received)		(Being – transferred to reserve and fund)

Procedure of Worksheet

Step 1: Write the debit balance of ledgers on the debit side and the credit balance of ledgers on the credit side.

Step 2: Write adjustment entries two times i.e. one entry on the debit side and another entry on the credit side.

Step 3: Now, unadjusted trial balance and adjustments are added or subtracted to the adjusted trial balance.

Step 4: both debit and credit sides are added to find out equal.

Here, debit and debit	= add Dr 100 + Dr 80	= Dr 180
Credit and credit	= add Cr 50 + Cr 40	= Cr 90
Debit and credit = write more amount as debit or credit Dr 80 and Cr 30 = Dr 50
Credit and debit = write more amount as debit or credit Cr 70 and Dr 40 = Cr 30

Step 5: From adjusted trial balance, transfer amount into income statement, P&L appropriation and balance sheet respectively,

Step 6: After transferring the entire amount into a related place, find out net profit or net loss from the income statement,

Step 7: Transfer net profit into credit side of P&L appropriation account (if a net loss, transfer into the debit side)

Step 8: After transferring the net profit or net loss, find out surplus or deficit from P&L appropriation account,

Step 9: Transfer surplus into liabilities side of the balance sheet (deficit into assets side of the balance sheet),

Step 10: Do the sum of the balance sheet. Assets and liabilities must be equal.

Keep in Mind (KIM)

We should prepare 12 columns worksheet on the following conditions:

When profit and loss appropriation account, net profit last year, provision for tax last year, interim dividend etc are given in the trial balance

Proposed dividend, general reserve etc are given in adjustment,

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2A

The trial balance of ABC Limited Company as on 31 December 2020 is given below:

Particulars	Amount Dr	Particulars	Amount Cr
Opening stock	40,000	Share capital	100,000
Purchase	200,000	Sales	300,000
Wages	20,000	P&L Appⁿ account	50,000
Salaries	30,000	Creditors	30,000
Rent	24,000	Sundry income	20,000
Cash	36,000
Debtors	50,000
Machinery	100,000
	500,000		500,000

Additional information:

a. Wages outstanding Rs 5,000

b. Depreciation on machinery by 10%

c. Proposed dividend @ 10%

d. Closing stock was valued Rs 50,000

Required: Journal entry and work sheet

[Answer: Adjustment = Rs 75,000; Adjusted TB = Rs 565,000;

Net profit = Rs 41,000; Surplus = Rs 81,000; Balance sheet = Rs 226,000]

SOLUTION:

Journal Entries

Date	Particulars		LF	Amount Dr	Amount Cr
a	Wages account	Dr		5,000
	To Outstanding wages account				5,000
	(Being: wages payable)
b	Depreciation account	Dr		10,000
	To Machinery account				10,000
	(Being: depreciation charged on 100,000@ 10%)
c	P&L appropriation account	Dr		10,000
	To Proposed dividend account				10,000
	(Being: dividend proposed on capital 100,000@ 10%)
d	Closing stock	Dr		50,000
	To Income statement (trading account)				50,000
	(Being: closing stock recorded)

Twelve Columns Work Sheet

Particulars	Part 1		Part 2		Part 3		Part 4		Part 5		Part 6
	Trial balance		Adjustments		Adjusted TB		Income statement		P&L Appⁿ		Balance sheet
	Dr	Cr	Dr	Cr	Dr	Cr	Dr	Cr	Dr	Cr	A	L
Opening stock	40,000				40,000		40,000
Purchase	200,000				200,000		200,000
Wages	20,000		5,000^a		25,000		25,000
Salaries	30,000				30,000		30,000
Rent	24,000				24,000		24,000
Cash	36,000				36,000						36,000
Debtors	50,000				50,000						50,000
Machinery	100,000			10,000^b	90,000						90,000
Share capital		100,000				100,000						100,000
Sales		300,000				300,000		300,000
P&L Appⁿ account		50,000				50,000				50,000
Creditors		30,000				30,000						30,000
Sundry income		20,000				20,000		20,000
	500,000	500,000
Outstanding wages				5,000^a		5,000						5,000
Depn on mach.			10,000^b		10,000		10,000
Proposed dividend			10,000^c	10,000^c	10,000	10,000			10,000			10,000
Closing stock			50,000	50,000^d	50,000^d	50,000		50,000			50,000
Net profit (b/f)							41,000*			41,000*
Surplus (b/f)									81,000			81,000
			75,000	75,000	565,000	565,000	370,000	370,000	91,000	91,000	226,000	226,000

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2B

The trial balance of Metro Company Ltd as on 31 Dec 2020 is given below:

Particulars	Debit $/Rs		Credit $/Rs
Opening stock	40,000	Share capital	150,000
Purchase	180,000	Sales	350,000
Wages and salaries	70,000	General reserve	50,000
Interim dividend	5,000	Account payable	20,000
Rent	19,000	Commission	30,000
Cash and bank	36,000
Account receivable	150,000
Fixed assets	100,000
	600,000		600,000

Additional information:

a. Prepaid rent was Rs 1,000

b. Create general reserve by Rs 8,000

c. Commission includes Rs 5,000 received in advance

d. Dividend proposed @ 10% share capital including interim dividend

Required: Journal entries for adjustments and work sheet

[Answer: Adjustment = Rs 24,000; Adjusted TB = Rs 618,000;

Net profit = Rs 67,000; Surplus = Rs 44,000; Balance sheet = Rs 287,000]

*Net dividend [Rs 150,000 @ 10%) − 5,000 interim dividend] = Rs 10,000

SOLUTION:

Journal Entries

Date	Particulars		LF	Amount	Amount
a	Prepaid rent account	Dr		1,000
	To Rent account				1,000
	(Being: rent paid in advance)
b	P&L appropriation account	Dr		8,000
	To General reserve account				8,000
	(Being: new general reserve created)
c	Commission account	Dr		5,000
	To Advance commission account				5,000
	(Being: commission received in advance)
d	P&L appropriation account	Dr		10,000
	To Proposed dividend account				10,000
	[Being: dividend proposed (Rs 150,000 @ 10%) − 5,000 interim]

Twelve Columns Work Sheet

Particulars	Part 1		Part 2		Part 3		Part 4		Part 5		Part 6
	Trial balance		Adjustments		Adjusted TB		Income statement		P&L Appⁿ		Balance sheet
	Dr	Cr	Dr	Cr	Dr	Cr	Dr	Cr	Dr	Cr	A	L
Opening stock	40,000				40,000		40,000
Purchase	180,000				180,000		180,000
Wages and salary	70,000				70,000		70,000
Interim dividend	5,000				5,000				5,000
Rent	19,000			1,000^a	18,000		18,000
Cash	36,000				36,000						36,000
Account receivable	150,000				150,000						150,000
Fixed assets	100,000				100,000						100,000
Share capital		150,000				150,000						150,000
Sales		350,000				350,000		350,000
General reserve		50,000		8,000^b		58,000						58,000
Account payable		20,000				20,000						20,000
Commission received		30,000	5,000^c			25,000		25,000
	600,000	600,000
Prepaid rent			1,000^a		1,000						1,000
General reserve			8,000^b		8,000				8,000
Advance commission				5,000^c		5,000						5,000
Proposed dividend			10,000^d	10,000^d	10,000	10,000			10,000			10,000
Net profit (b/f)							67,000*			67,000*
Surplus (b/f)									44,000			44,000
			24,000	24,000	618,000	618,000	375,000	375,000	67,000	67,000	287,000	287,000

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2C

The trial balance of Apex Company Ltd as on 31 December 2020 is given below:

Particulars	Debit Rs	Credit Rs
Sale	–	6,25,000
wages	20,000
Opening stock	25,000
Purchase	4,27,000
Salaries	65,000
Equity share capital (2,500 @ Rs100)		2,50,000
Debenture		2,00,000
Sundry debtors	55,000
Fixed assets	2,50,000
Pattern and design	1,50,000
General expenses	45,000
Prepaid insurance	4,000
Creditors		65,000
Advance commission received		7,000
Cash at bank	1,25,000	–
P&L appropriation account	–	24,000
Interim dividend	5,000	–
	11,71,000	11,71,000

Additional information:

a. Depreciate fixed assets by 10%.

b. Provision for bad debts 5%.

c. Prepaid insurance expired Rs 2,000.

d. The 50% of the advance commission received is earned.

e. Transfer to general reserve Rs 15,000.

f. Proposed dividend 5% on paid-up capital.

g. Closing stock Rs 30,000.

Required: Journal entries for adjustments and twelve column worksheet

[Answer: Adjustment = Rs 90,750; Adjusted TB = Rs 12,28,500;

Net profit = Rs 46,750; Surplus = Rs 38,250; Balance sheet = Rs 584,250]

SOLUTION:

Journal Entries

Date	Particulars		LF	Amount Dr	Amount Cr
a.	Depreciation account	Dr		25,000
	To Fixed assets account				25,000
	(Being: depreciation charged in fixed assets.)
b.	Bad debts account	Dr		2,750
	To Sundry debtors account				2,750
	(Being: bad debts provided on sundry debtors)
c.	Insurance account	Dr		2,000
	To Prepaid insurance account				2,000
	(Being: prepaid insurance expired.)
d.	Advance commission account	Dr		3,500
	To Commission earned account				3,500
	(Being: 50% advance commission received as earned)
e.	P&L Appropriation account	Dr		15,000
	To General reserve account				15,000
	(Being: amount transferred to general reserve out of profit)
f.	P&L Appropriation account	Dr		12,500
	To Proposed dividend account				12,500
	(Being: proposed dividend out of profit)
g.	Closing stock account	Dr		30,000
	To Trading account				30,000
	(Being: closing stock adjusted to trading account)

Twelve Columns Work Sheet

Particulars	Part 1		Part 2		Part 3		Part 4		Part 5		Part 6
	Trial balance		Adjustments		Adjusted TB		Income statement		P&L Appⁿ A/c		Balance sheet
	Dr	Cr	Dr	Cr	Dr	Cr	Dr	Cr	Dr	Cr	A	L
Sale		6,25,000				6,25,000		6,25,000
wages	20,000				20,000		20,000
Opening stock	25,000				25,000		25,000
Purchase	427,000				427,000		427,000
Salaries	65,000				65,000		65,000
Share capital		250,000				250,000						250,000
Debenture		200,000				200,000						200,000
Sundry debtors	55,000			2,750^b	52,250						52,250
Fixed assets	250,000			25,000^a	225,000						225,000
Pattern and design	150,000				150,000						150,000
General expenses	45,000				45,000		45,000
Prepaid insurance	4,000			2,000^c	2,000						2,000
Creditors		65,000				65,000						65,000
Advance comm. received		7,000	3,500^d			3,500						3,500
Cash at bank	125,000				125,000						125,000
P&L appn A/c		24,000				24,000				24,000
Interim dividend	5,000				5,000				5,000
	11,71,000	11,71,000
Depreciation			25,000^a		25,000		25,000
Bad debts			2,750^b		2,750		2,750
Prepaid Ins. expired			2,000^c		2,000		2,000
Commission earned				3,500^d		3,500		3,500
General reserve			15,000^e	15,000^e	15,000	15,000			15,000			15,000
Proposed dividend			12,500^f	12,500^f	12,500	12,500			12,500			12,500
Closing stock			30,000^g	30,000^g	30,000	30,000		30,000			30,000
Net profit c/d							46,750			46,750
Surplus c/d									38,250			38,250
Total			90,750	90,750	12,28,500	12,28,500	6,58,500	6,58,500	70,750	70,750	5,84,250	5,84,250

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2D

The following unadjusted trial balance of AH Company Ltd:

Account Heads	Dr Amount	Particulars	Cr Amount
Cash	25,000	Accumulated depn on building	2,000
Accounts receivable	7,000	Accumulated depn on plant	1,000
Supplies	2,000	Notes payable	30,000
Prepaid insurance	3,000	Accounts payable	4,000
Land	51,500	Unearned rent	6,000
Building	80,000	Share capital	60,000
Plant	40,000	Reserves	20,000
Vehicles	15,000	Service revenue	160,000
Advertising	4,000	P&L appropriation account	25,000
Wages	50,000	Provision for tax	15,000
Supplies expenses	6,000
Depreciation on building	1,500
Depreciation on plant	2,000
Utility expenses	18,000
General expenses	15,000
Interest expenses	3,000
	323,000		323,000

Additional information:

a. Service revenue earned but not yet billed Rs 1,000.

b. Supplies consumed during the year Rs 500.

c. Half of the un-earned rent is earned during the year.

d. One-third of un-expired Insurance has expired during the period.

e. Unpaid wages during the period is Rs 2000.

f. Transfer to reserve fund Rs 10,000.

g. Proposed dividend Rs 12,000.

Required: Work sheet

[Answer: Adjustment = Rs 29,500; Adjusted TB = Rs 308,000;

Net profit = Rs 61,000; Surplus = Rs 79,000; Balance sheet = Rs 223,000]

SOLUTION:

Twelve Columns Work Sheet

Particulars	Part 1		Part 2		Part 3		Part 4		Part 5		Part 6
	Trial balance		Adjustments		Adjusted TB		Income statement		P/L Appropriation		Balance sheet
	Dr	Cr	Dr	Cr	Dr	Cr	Dr	Cr	Dr	Cr	A	L
Cash	5,000				5,000						5,000
Accounts Receivable	7,000				7,000						7,000
Supplies	2,000			500	1,500						1,500
Prepaid Insurance	3,000			1,000^d	2,000						2,000
Land	51,500				51,500						51,500
Building	80,000				40,000						80,000
Acc. Depreciation		2,000				2,000						2,000
Plant	60,000				60,000						60,000
Acc. Depreciation		1,000				1,000						1,000
Vehicles	15,000				15,000						15,000
Advertising	4,000				4,000		4,000
Wages	50,000		2,000^e		52,000		52,000
Supplies Expenses	6,000				6,000		6,000
Depreciation Building	1,500				1,500		1,500
Depreciation (Plant)	2,000				2,000		2,000
Utility Expenses	18,000				18,000		18,000
General Expenses	15,000				15,000		15,000
Interest Expenses	3,000				3,000		3,000
Notes Payable		30,000				30,000						30,000
Accounts Payable		4,000				4,000						4,000
Unearned Rent		6,000	3,000^c			3,000						3,000
Share capital		60,000				60,000						60,000
Reserves		20,000		10,000		30,000						30,000
Service Revenue		160,000		1,000		161,000		161,000
Provision for tax		15,000								15,000
P&L Appⁿ account		25,000								25,000
	283,000	283,000
Service revenue due			1,000^a		1,000^a						1,000
Supplies consumed			500^b		500^b		500
Rent earned				3,000^c		3,000		3,000
Insurance expired			1,000^d		1,000		1,000
Unpaid wage				2,000^e		2,000						2,000
General reserve			10,000^f		10,000^f				10,000
Proposed dividend			12,000^g	12,000^g	12,000	12,000			12,000			12,000
Net profit c/d							61,000			61,000
Surplus c/d									79,000			79,000
Total			29,500	29,500	308,000	308,000	164,000	164,000	101000	101,000	223,000	223,000

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PROBLEMS AND ANSWERS

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2A

The trial balance of AS Company Ltd as on 31^stDecember is given below:

Particulars	Debit Rs	Particulars	Credit Rs
Opening stock	40,000	Share capital	1,00,000
Purchase	2,00,000	Sales	4,00,000
Wages and salaries	50,000	P&L account last year	50,000
Calls in arrear	5,000	Account payable	30,000
Rent	19,000	Advance commission	20,000
Cash	1,36,000
Account receivable	50,000
Machinery	1,00,000
	6,00,000		6,00,000

Additional information:

1. Advance commission earned Rs 15,000 for the year.

2. Proposed dividend @ 10%.

3. Bad debts are to be written off Rs 10,000.

4. Provision for bad debts is to be maintained @10%.

Required: Journal entry and work sheet

[Answer: Adjustment = Rs 38,500; Adjusted TB = Rs 609,500;

Net profit = Rs 92,000; Surplus = Rs 132,500; Balance sheet = Rs 277,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2B

The trial balance of BH Company Ltd as on 31^stDecember is given below:

Particulars	Debit Rs	Particulars	Credit Rs
Opening stock	60,000	Share capital	1,20,000
Purchase	2,00,000	Sales