The heading should identify the entity, the document and the time period.

1. The heading should identify the entity, the document and the time period.

2. The worksheet collects and summarizes the information used to prepare financial statements, adjusting entries and closing entries.

3. Step 1 Enter the unadjusted trial balance on the worksheet

4. These two columns totals must be in balance! Dr = Cr

5. Step 2 Enter the adjustments directly onto the worksheet

6. Step 2 Enter the adjustments directly onto the worksheet You may need to add additional accounts

7. Step 2 Enter the adjustments directly onto the worksheet

8. These two columns totals must be in balance! Dr = Cr

9. Step 3 Sum the unadjusted trial balance with the adjustments and enter the total in the adjusted trial balance column.

10. Helpful Hint #1 Remember that if an account has a debit balance on the unadjusted trial balance, it will have a debit balance on the adjusted trial balance as well.

11. Helpful Hint #2 A debit balance is increased by a debit adjustment but would be decreased by a credit adjustment. Therefore, for supplies, $3,600 – 1,050 = 2,550

12. Helpful Hint #3 Similarly, if an account has a credit balance on the unadjusted trial balance, it will have a credit balance on the adjusted trial balance as well.

13. Helpful Hint #4 When an account has a credit balance on the unadjusted trial balance, it will be decreased by a debit adjustment and increased by a credit adjustment. For unearned consulting revenue, $3,000 - 250 = $2,750

14. Helpful Hint #5 If a new account was added because of adjusting entries, then the adjusted trial balance will equal the amount of the debit or credit entered in the adjustments column.

15. Helpful Hint #6 Don’t forget to add all the debits in the debit column of the adjusted trial balance and make sure they are equal to all of the credits in the credit column. As always,Dr = Cr

16. Step 4 Complete the worksheet.

17. Helpful Hint #7 Once the adjusted trial balance columns are in balance, you can ignore the previous four columns. Only the balance from the adjusted trial balance column will be entered in ONE of the last four columns.

18. Helpful Hint #8 The income statement columns will only have income statement accounts in them (i.e. revenues and expenses). Revenues have credit balances and will therefore be entered in the credit columns.

19. Helpful Hint #9 Expenses have debit balances and will therefore be entered in the debit columns.

20. Helpful Hint #10 The balance sheet columns contain assets, liabilities, capital and withdrawals. A debit from the adjusted trial balance is recorded in the debit column of the balance sheet.

21. Helpful Hint #11 A credit from the adjusted trial balance is recorded in the credit column of the balance sheet.

22. Total each of the four columns. The debits will not be equal to the credits.

23. Step 5 Calculate net income (loss) by subtracting the debits (expenses) from the revenues (credits). This amount should be entered under the smaller of the two totals. In this case,$6,150 – 4,085 = 2,065. This number will be put in the debit column.

24. Helpful Hint #12 Since net income was entered in the debit column of the income statements, it will also be entered in the balance sheet. This time, as a credit, since Dr = Cr

25. Helpful Hint #13 Now, the last check of the worksheet is to total the income statement and balance sheet columns again. If you have completed the worksheet correctly: Dr = Cr

26. Helpful Hint #14 Now, how do we complete this section of the work sheet in the case of a net loss? To demonstrate, assume instead that total expenses were 4,085 and revenues were 2,500.

27. Helpful Hint #15 Under this assumption, the difference between revenues and expenses equals a net loss of 1,585. This amount should be entered under the smaller of the two totals. Enter 1,585 in the credit column of the income statement and the debit column of the balance sheet.