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Worksheet: Objectives of Worksheet, Procedures of Worksheet, Journal Entries for Adjustments

Arjun EP

Published on: February 5, 2021

Concept of Worksheet

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

It is the paper work.

It is prepared by accountant regarding adjustment entries.

Therefore, it is called scratch pad.

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

Work sheet is also known as extended trial balance (ETB).

This terminology is quite popular in British Accounting Literature.

Use of Worksheet

Generally, the work sheet is used for the following purposes:

(a) It permits the accountants to see the effects of adjusting entries without formal accounting records.

(b) This is particularly useful to change the estimates and make any corrections needed.

(c) It helps to the management and accounts to preview the possible financial statements before they are actually prepared.

(d) It serves as the basis for making the adjusting and closing entries in the accounting and

(e) It has become very popular as a basis for preparing the interim financial statements

Objectives of Worksheet

The basic objective of work sheet is to provide necessary information to prepare financial statement. Other major objectives are as follows:

· To check arithmetical accuracy of the transactions.

· To record adjustment entries in the financial statement.

· To know the operating result of the organization.

· To know the financial position of the business.

· To collect all financial information in one single paper.

Format of Worksheet

There are two types of formats of worksheet; they are 10 column worksheet and 12 column worksheet.

In 10 column worksheet, there is not profit and loss appropriation account or retained earning account.

Twelve Columns Work Sheet

Particular

Part 1

Part 2

Part 3

Part 4

Part 5

Part 6

Trial Balance

Adjustments

Adjusted Trial Balance

Income Statement

P/L Appⁿ Account

Balance Sheet

Part 1: It is the unadjusted trial balance part.

Part 2: It is the adjusting entries part. To understand properly, journalize the adjustment.

Part 3: It is the adjusted trial balance part. It is the total of trial balance and adjustment.

Part 4: It is the income statement part. It is the combination of trading account and P&L account.

Part 5: It is the P&L appropriation. It is also called retained earning account.

Part 6: It is the balance sheet. Debit is assets and credit is liabilities.

Procedure of Worksheet

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

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

Step 3: Now, unadjusted trial balance and adjustments are added or subtracted to 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 related place, find out net profit or net loss from income statement,

Step 7: Transfer net profit into credit side of P&L appropriation account (if net loss, transfer into 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 balance sheet (deficit into assets side of balance sheet),

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

Keep in Mind (KIM)

We should prepare 12 columns work sheet on following conditions:

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

Proposed dividend, general reserve etc are given in adjustment,

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Journal Entries for Adjustments

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)