1

Mubeen Tahir

BBA (Hons)

Roll No (36)

Semester 1

(Evening)

Assignment of I.T in Business

Topic (Work Sheet)

Submitted To

Mr. Sohail Mahmood Baber

 2

Work Sheet in Accounting

What is work sheet?

Many accountants use a work sheet to prepare the

unadjusted trial balance, to assign the adjusting entries to the correct
accounts, to create the adjusted trial balance, and then to prepare
preliminary financial statements. A work sheet is an optional step in the
accounting cycle. It is an informal document that is not considered a
financial statement, although it gives management some information
about results for a period. Work sheets usually have five sets of debit and
credit columns, which are completed from left to right one set at a time.

At the end of each period, after making adjusting entries

organizations close their books. A valuable tool useful to help summarize
and move data from the trial balance to the financial statements is a work
sheet.

A work sheet is illustrate is one place the relationship among

the unadjusted trail balance, proposed adjusting entries, and the financial
statement .A work sheet is prepared at the end of the period ,but before the
adjusting entries are formally recoded in the accounting records. It is not a
formal setup in the accounting cycle. Rather it is a tool used by accountants
to work out the details of the purposed end-of-period adjustments. It also
provides them with a preview of how the financial statement will look.

The flow of information affecting a business does not arbitrarily

stop at the end of an accounting period. In order to prepare the financial
reports the accountants must collect relevant data to determine what should
and what should not go in to the financial reports for the concerned period.

For example, accountants must examine insurance policies to

see how much period insurance had expired, examine plant and equipment
records to determine depreciation, take an inventory of supplies on hand
and calculate the amount of accrued wages. These calculations together with
other computation, analysis and preliminary drafts of statements make up
the accounts working papers. Working papers are important for two reasons.
First they aid the accounts in organizing their work so that they do not omit
important data or steps which effect the accounting statement .Second they
provides evidence of what has been done so that accountants or auditors
can retrace their steps and support the basis of the financial statements .
 3

Definitions of worksheet:

Work sheet:
  As Noun:
1. A sheet of paper on which work schedules, working time,
special instructions, etc., are recorded.
2. A piece or scrap of paper on which problems, ideas, or the
like, are set down in tentative form.
3. Also, worksheet. Accounting. A sheet of paper on which is
printed a series of columns and into which tentative figures
are entered as a preliminary step in preparing the adjusted or final statement.

Jennifer VanBaren;
An accounting worksheet is a ledger sheet that lists all the
balances of each account a business has on a certain date. An accounting worksheet is
done at the end of an accounting period, and it is used to make adjustments to
accounting entries, to close entries and finally to prepare financial statements.
Other Definitions:

Informal document in which an accountant or auditor

records the information for (1) adjusting trail balances prior to preparing financial
statement or to (2) substantiate his or her opinion regarding an account balance or a
transaction.
According to Wikipedia definition:
In accounting a worksheet often refers to a loose leaf piece of stationary
from a columnar pad, as opposed to one that has been bound into a psycal ledger book.
From this, the term was extended to designate a single, two-dimensional array of data
within a computerized spreadsheet program Common types of worksheets used in
business include financial statement, such as profit and lost report Analysts, investors,
and accountants track a company's financial statements, balance sheets, and other
data on worksheets.

A work sheet is a “testing ground “on which ledger accounts are

adjusted. It can be defined as fallows:
 4

“A multi column schedule showing the relationship among the current

accounts blances,proposed adjusting entries or transactions, and the financial
statements’’.

A work sheet may also define as a large columnar statement specially

designed to organize and arrange all accounting data required at the end of the
accounting period.

A worksheet is a rough work of an accountant. It is prepared by a

lead pencil on a large sheet of paper. If there arise an error then the figures can be
erased and easy to correct. With the advent of computers and introduction of spread
sheets software the work sheet is prepared on these spared sheets.

“A worksheet is a large columnar sheet of paper, especially

designed to arrange in a convenient systematic form, all the accounting data, required
at the end of the period. It is not a permanent record but it is a working paper of
account”.

“A worksheet is a 10-column spreadsheet used to draft a

company's unadjusted trial balance, adjusting entries, adjusted trial balance, and
financial statements. This is an optional step in the accounting process.”

Isn’t This Really a Spreadsheet?

Yes. The term worksheet is a holdover from the days
when these schedules were prepared manually on large sheets of columnar paper.
Today most worksheets are prepared on a computerizing spared sheet software such
as excel or with general ledger software such as Peachtree or Dac –Easy.

Since the worksheet is simply a tool used by accountants it often

isn’t printed out in hard copy –it may exist only on a computer screen. But the concept
remain the same ;the worksheet displays in one place the unadjusted account balances,
proposed adjusting entries and financial statements as they will appear if the proposed
adjustments are made.

How Work Sheet Used?

A worksheet serves several:
It allows accountants to see the effects of adjusting entries
without actually entering these adjustments in the accounting recodes. This makes it
relatively easy for them to correct errors or make changes in estimated accounts.

It also enables accounts and management to preview the

financial statement before the final drafts and developed. Ones the worksheet is
 5

complete it serves’ as the source for recording adjusting and closing entries in the
accounting records and for preparing financial statements.

Another important use of the worksheet is in the

preparation of the in term financial statement. In term statements are financial
statements developed various points during the financial year. Most companies close
their accounts only once each year. Yet they often need to develop quarterly or monthly
financial statements.

Through the use of the work sheet thy can develop these
interim statements without having to formally adjust and close their accounts.

i. Work sheet allows accountants to see the effects of

the adjustments without entering into the ledgers. It
is easy to correct errors or changes in estimated
amounts.
ii. Work sheet enables accountants and managements
to see the preview of the statements before final and
formal statements.
iii. A work sheet completes in all respects serves a
source of making adjusting entries in the ledger.
Closing entries could also be prepared without the
help of work sheet.
iv. Work sheet is used for the preparation of interim
financial statements. The interim statements could
be prepared any time during an accounting period.
v. The worksheet is used frequently as a preliminary
step in preparation of the financial statement.
vi. One way of avoiding errors in these permanent
accounting recodes is to use the work sheet.
vii. A work sheet is a large columnar sheet of paper,
especially designed to arrange in a convenient
systematic from all the accounting data required at
the end of the period.
viii.The worksheet is a tool for creating a trial balance
and an adjusted trial balance. It uses all of the
accounts contained in the company's accounting
records, records adjusting entries and calculates the
final numbers to enter on the financial statements.
ix. Creating a worksheet is an optional step and is
most often used in manual accounting systems.

x. A worksheet may be used as an analysis tool in a

computerized or manual accounting system.
 6

xi. When a worksheet is complete, the company

prepares financial statements from them.
xii. Use of a worksheet ensures the arithmetical
accuracy of the accounts and facilities the
preparation of the financial statement.
xiii.It is useful tool for the accountant and remains with
the accounts department as a working paper, but is
not part of he formal accounting records.
Advantage of worksheet:
The work sheet offers following advantages;
i. It brings together the trail balance and the adjusting data.
ii. It reduces the chances of errors and the same assists location of errors which
may be made in adjusting, closing and balancing accounts.
iii. It classifies and summarizes the information shown by the trial balance and the
adjusting data. It facilitates preparation of financial statements and closing
entries.
iv. The net result of the business activities are known before preparing formal
financial statement. It makes possible the preparation of the statements during
the financial period.
v. The worksheet is designed in a manner that it minimizes the chances of errors to
the maximum possible extent.
vi. It brings into light many types of discrepancies which otherwise might be entered
in the journal and posted to the ledger accounts.
vii. It is easy to change the figures on spread sheets.
Importance:
The difference between revenues and expenses determines the net
income or net loss for the period. This amount will balance both columns: the Income
Statement and the Balance Sheet. Note that if its balance is credit on the Income
Statement it will be Credit on the Balance Sheet.
Creating an IF function that calculates the 10-column accounting worksheet for financial
statements takes a careful design to ensure accuracy on the carried over amounts. This
is the scenario: Accounts are listed on the far left. The first two columns hold the debit
and credit balance for the 'Trial Balance'. The next two hold the debit and credit balance
for the 'Adjusting Entries'. The next two after that are the Debit and Credit columns for
the 'Adjusted trail balance creating formula using the functions if that computes the
adjusted trail balancefiguers from the adjusting entries which adds a normal credit to a
credit adjusting entry, subtracting a credit from a debit and returning with a positive
number.

What Is the Purpose of an Accounting Worksheet?

By Jennifer VanBaren, eHow Contributor
 7

Updated: May 11, 2010

A snapshot of bookkeeping information

An accounting worksheet is a tool that business uses to balance and close out their
books at the end of a period. An accounting worksheet lists all the balances of each
account a business has, with adjusting and closing entries made to these balances.
When a worksheet is complete, the company prepares financial statements from them.
Chart of Accounts
1. Every company keeps a chart of accounts which lists every account the company has. It
is divided into five sections: assets, liabilities, equity, revenue and expenses. Each of
these accounts is in the company's general ledger, where balances of each account are
maintained. An accounting worksheet begins by listing each account and the balance
each account has.
Adjusting Entries
2. One main purpose of an accounting worksheet is to record adjusting entries. Adjusting
entries are made at the end of each period. They are not normal everyday-type entries;
they only take place at the end of a month or period. Examples of adjusting entries are
those adjusting for supplies used, insurance used, revenue earned and interest earned.
These entries are recorded on the worksheet.
Trial Balance
3. After adjusting entries are made, each account is updated on the worksheet. If an
account had an adjusting entry, the previous amount in that account needs to be
adjusted. If no adjusting entry is made to an account, the same balance transfers over
to this column. The worksheet helps to keep the company's ledger in balance.
Closing Entries
4. The worksheet is a 10-column ledger and is also used to calculate and record closing
entries. Books are always closed at the end of every fiscal year, and the worksheet aids
the closing process.
Financial Statements
5. One of the primary uses for a worksheet is for the information it contains. After adjusting
entries are made and closing entries are finalized, the financial statements of a
business are generated. The worksheet contains all the information needed to prepare
 8

these statements. After the financial statements are prepared, the company begins a
new worksheet for the following year.
Limitation of Worksheet:
i. It does not eliminate the need of making adjusting and closing entries in
concerned ledger accounts.
ii. It does not eliminate the need of proper financial statements.

A work sheet contains ten columns:

1. Trail Balance
2. Adjustments
3. Adjusted trail balance
4. Income Statement
5. Balance Sheet
Each of above have two columns one Cr. and other Dr.
One of the best way yet developed of avoiding errors in the permanent records
and also simplifying the work at the end of the period is to make use of an
informed record is called a work sheet.
FORMAT OF WORK SHEET
Name of Trail Adjustments Adjusted Income Balance
Account Balance Trail Statement Sheet
Balance
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Accounts’ unadjusted ending balances are entered under the heading of Trial
Balance. These amounts come directly from the ledgers accounts. Accounts are
usually grouped in the same order as they appear in the ledger: Assets,
Liabilities, Owners’ Equity, Revenue, and Expenses.

Next, adjustments are reflected under Adjustments. Obviously the double entry
process ensures that total debits are equal to total credits. Usual adjustments
are: Prepaid expenses, depreciation, amortization, and unearned revenue.
 9

The Adjusted Trial Balance is the result of combining the trial balance unadjusted
ending balances with the adjustments.

Preparation of the work sheet:

A work sheet prepared on paper or on computer, it involves five steps:
1. Enter the ledger balances in the balance columns.
2. Enter the adjustments in the adjustments columns.
3. Prepare an adjusted trail balance. This is done by adding up or getting
result of the trail balance and adjustments columns.
4. Extend the adjusted trial balance amounts in to income statements and
balance sheet.
5. Total the column of income statements and shift the net income/net loss to
balance sheet then total the balance sheet.
In smaller companies the adjustments are usually entered directly in the
journal and posted to the ledger and the financial statement are prepared directly from
the adjusted trail balance. For larger companies however which may require many
adjusting entries a work sheet are essential. The worksheet is identified by a heading
that consist of the name of the company, the title “Work Sheet” and the period of time
covered (as on the income statement).

Explain how to complete the columns of the work sheet. Turn to

the work sheet illustrated in the text. It is not necessary to prepare a separate trial
balance if a work sheet is used. The adjusted trial balance columns are a check on the
mathematical accuracy of the work sheet.

There are the Five Steps with Detail:

1. Enter the ledger account balances in the Trail balance Columns:
The titles and balances of the accounts are copied directly from the
ledger into the trail balance columns. When a work sheet is prepared a spread trail
balance may be posted from in it in the work sheet. When a company's accounting
period ends, a worksheet is produced. This is done on a 10-column ledger sheet, and
each account is listed individually on the left-hand side. The first two columns of
numbers list each account's balance. Some will be debits, placed on the left, and some
will be credits, placed on the right. The orders in which the accounts are listed are:
assets, liabilities, equity, revenue and expenses. Each column is totaled and the
amounts are listed on the very bottom. The debit and credit columns should balance out
by being the same number.
 10

2. Entering the adjustments in the adjustments column:

Adjustments have been already explained. The same adjustments are entered
in the adjustment columns of the work sheet as shown in earlier example. As each
adjustment is entered is, a letter is used to identify the debit and the credit parts of the
same entry. In practice, this letter may be used to reference supporting computations or
documentation underlying the adjusting entry. When all the adjustments have been
entered in relevant debit and credit columns, the pair of adjustments columns must be
added .This step proves that the debit and the credits of the adjustments are equal and
generally reduces error in the preparation of the work sheet.

The next two columns of numbers represent the debits and credits for
adjusting entries. Adjusting entries are made to adjust certain accounts and bring them
up to date. Adjusting entries include things such as inventory, supplies, insurance,
depreciation, interest expenses and interest incomes. An example of an adjusting entry
would be if the Supplies account was listed as $300, but when an actual count showed
there is only $250 of supplies, an entry would be made to make up this difference. A
$50 debit would be placed under Supplies Expense and a $50 credit would be placed
under Supplies. The adjustment columns are totaled and balanced out. The amounts
should equal.

3. Entering the accounts balances as adjusted in The Adjusted trail

balance:
The adjusted trail balance prepared by combining the amount of each
account in the original trail balance columns with the corresponding amounts in the
adjustments columns and entering the combined amount on a line –by-line basis in the
adjusted trail balance columns. Adjusted trail balance columns are then footed that is
totaled to check the arithmetical accuracy of tile cross footing just like that of a normal
trail balance.
Some accountants prefer to eliminate the adjusted trail balance
columns and to extend the adjusted accounts balances directly to the appropriate
statement especially popular if there are only a few items involved it would then be
called a “ten column Work Sheet”.
After the adjustments are made, all of the account balances are
updated. The new totals are put in the next two columns of the ledger. If no adjustment
was made to an account, the account balance simply transfers over. If an adjustment
was made to an account, the new balance transfers over. When

The trial balance is complete and balanced; the amounts are placed in either of the next
two columns depending on what they are.
At this point, the worksheet is almost complete. We have emphasized
that financial statements are prepared directly from the adjusted trail balance. Thus we
have only to arrange these accounts in to the format of the financial statements. For this
 11

reason we show the adjusted trail balance amount in blue both in the adjusted trail
balance columns and when these amounts are extended in to the financial statement
columns.
4. Extending the account balance from the adjusted trail balance column
to the profit and loss columns or the balance sheet columns:
Every account in the adjusted trail balance is either a balance sheet
account or an income statement account. The accounts are sorted and each account is
extended to its proper place as a debit or credit either in the balance sheet columns or
in the trading and profit and loss columns. The result of extending the accounts is
shown in example -8. Revenue and expenses accounts are moved to the profit and loss
columns. Assets and liabilities as well as capital and drawing accounts are then
extended to the balance sheet columns. To avoid over looking an account, extend the
account line by line beginning with the first line (which is cash) and not omitting any.
The next two columns represent accounts that are represented on
the Income Statement. An Income Statement is a financial document that shows all
revenues and all expenses. Any revenue and expense accounts are to be placed on
these columns. An Income Statement is generated based on this information, and this
statement shows the company's net income or net loss for the period.
The balance sheet accounts assets liabilities and owners equity are
extended into the balance sheet columns: income statements amounts into the income
statements columns. The balance sheet and the income statement captions in the
original trail balance should simplify this procedure. Notice each amount is extended to
only one column. Also the account retains the same debit or credit balances as shown
in the adjusted trail balance.
5. Totaling the incoming statements and the balances sheet columns.
Enter the net income or net loss in both pairs of columns as a
balancing figure, and recomputed column totals:
The final step is preparing the worksheet consists of totaling the
income statement and balance sheet columns and then bringing each set of columns
into balance these tasks are performed on the bottom three lines of the work sheet .In
our illustrations the amount involved in this final setup are shown in black .
Net income or net loss is equal to the difference between the debit
and the credit columns of the income statements.
The remaining account balances are to be transferred to the last
two columns, which are balance sheet accounts. All asset, liability, and equity accounts
are to be placed in these two columns. A Balance Sheet is then generated that shows
the company's assets, liabilities and equity for that date.
When the income statement and the balance sheet columns are
totaled, the debit and the credits column will not arrange. But each set of columns
should be out of balance by the same amount –and that amount should be the amount
of net income or net loss for the period.
 12

Let us briefly explain why both sets of columns initially are out of
balance by this amount. First consider the income statement columns. The credit
column contains the revenue accounts and the Debit column, the expanse account. The
difference therefore the net income for the period.
Now considers the balance sheet columns. All of the balance
sheet amounts are shown at up-to-date amount except for the retained earning account
which still contains the balance from beginning of the period. The bring the retained
earning account up to date we must added net income and subtract any dividend. The
dividends already appear in the balance sheet column. So what’s the only thing
missing?
To bring both sets of columns into balances we enter the net
income on the next line. The same amount will appear in both income statements
columns and the balance sheet. But it one set of column it appears as a debit and in the
other it appears as accredit. After this amount is entered each set of columns should
balance.
Computers Do the Pencil-Pushing:
When a work sheet is prepared by computer accountants
perform only on of the steps listed above –entering the adjustments. The computer
automatically lists the ledger accounts in the form of a trail balance. After the
accountants have entered the adjustments it automatically computes the adjusted
account balances and completes the work sheet. (Once the adjusted balances are
determined completing the worksheet involves nothing more than putting these amounts
in the appropriate column and determining the column totals.)
There is a tendency to view worksheet as mechanical and old
fashioned. This is not in all case .Today the mechanical aspects are handled by
computer. The real purpose of a work sheet is to show quickly and efficiently how
specific events or transactions will affect.

There is an example of work sheet:

The Greener Landscape Group Work Sheet For the Month Ended April 30,20X2
 13

Adjusted Trial Income

Trial Balance Adjustments Balance Statement Balance Sheet
Dr. Dr. Dr. Dr.
Dr. Cr. Dr. Cr. Cr. Cr. Dr. Cr. Dr. Cr. Cr. Cr. Dr. Cr. Dr. Cr.
Cash 6,355 6,355 6,355

Accounts Receivable 150 50 (a) 200 200

Supplies 50 25 (e) 25 25

Prepaid Insurance 1,200 100 (f) 1,100 1,100

Equipment 3,000 3,000 3,000

Vehicles 15,000 15,000 15,000

Accounts Payable 50 50 50

Unarmed Revenue 270 45 (d) 225 225

Notes Payable 10,000 10,000 10,000

J. Green, Capital 15,000 15,000 15,000

J. Green, Drawing 50 50 50

Lawn Cutting Revenue 750 50 (a) 845 845

45 (d)

Wages Expense 200 80 (c) 280 280

Gas Expense 30 30 30

Advertising Expense 35 35 35

Totals 26,070 26,070

Interest Expense 79 (b) 79 79

Interest Payable 79 (b) 79 79

Wages Payable 80 (c) 80 80

Supplies Expense 25 (e) 25 25

Insurance Expense 100 (f) 100 100

Depreciation Expense– 200 (g) 200 200

Vehicles
Accumulated Depreciation– 200 200 200
Vehicles (g)
Depreciation Expense– 35 (h) 35 35
Equipment
Accumulated Depreciation– 35 (h) 35 35
Equipment
Totals 614 614 26,514 26,514 784 845 25,730 25,669

Net Income 61 61
 14

Adjusted Trial Income

Trial Balance Adjustments Balance Statement Balance Sheet
Dr. Dr. Dr. Dr.
Dr. Cr. Dr. Cr. Cr. Cr. Dr. Cr. Dr. Cr. Cr. Cr. Dr. Cr. Dr. Cr.
Totals
15