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LESSON 7 PREPARATION OF SIMPLE WORKSHEET & FINANCIAL STATEMENTS

WORKSHEET A large columnar sheet designed to arrange in convenient form all the accounting data required at the end of the period. Facilitates the preparation of the financial statements and the work of adjusting and closing the accounts. PREPARATION OF SIMPLE WORKSHEET (6-COLUMN WORKSHEET) 1) The heading of the worksheet consists of three lines: Name of the business: Name of the form: Period covered by the report 2) Write the column heading as follows: Acct. No. Account Titles Trial Balance DR CR Income Statement DR CR Balance Sheet DR CR XYZ Company Worksheet For the year ended December 31, 2009

3) Copy the trial balance in the Trial Balance columns of the worksheet. Total the columns. Double rule the totals. 4) From the Trial Balance columns, extend the balances of real accounts (Asset, liabilities and capital) to the Balance Sheet columns. Asset account balances are extended to the debit side of the balance sheet columns while balances of liability and capital accounts are extended to the credit side of the balance sheet columns. 5) Total DR and CR columns. If the totals are not equal, get the difference between the two totals. Record the difference below the smaller total. This will make the two sides equal. Total again the columns. Double rule the totals. 6) Extend the balances of the nominal accounts (Income and Expenses) to the Income Statement columns. Balances of income accounts are extended to the CR column; balances of expense accounts, to the DR column. 7) Follow the same procedure as in no,5. 8) Label the difference as net profit or net loss, representing the results of business operation. Write the result (Net Profit or Net Loss) under the Account Titles column. a. If the total CR is bigger than the total DR, the result is Net Profit, b. If the total DR is bigger than the total CR, the result is a Net Loss Note: The difference between debit and credit totals under the Income Statement columns should be equal to the difference between debit and credit totals under the balance sheet columns. If they are not equal, your work is not correct

FINANCIAL STATEMENTS
INCOME STATEMENT Presents the revenues and expenses of an enterprise during one fiscal or accounting period and show the net profit or net loss. An excess of revenues over expenses produces net profit An excess of expenses over revenues produces net loss. FORMS OF INCOME STATEMENT PRESENTATION A. Single Step Presentation Used by a service business, contains only two sections: the revenue section and the expense section. The results of business operation is determined by subtracting expenses from income

B.

Multiple step Presentation Used by a merchandising business, it has 3 main sections: revenue section, cost of goods sold section and expense section. There are series of income computation before the final profit (loss) is determined. Note: Multiple step form of income statement will be discussed in Lesson 9

BALANCE SHEET Summary of assets owned, liabilities owed and the changes in capital of the owner. Prepared to present the financial position of the business enterprise on a specific date. Composed of two sections: Assets section grouped into Current and Fixed Assets Liabilities and Capital section FORMS OF BALANCE SHEET PRESENTATION A. ACCOUNT FORM PRESENTATION Assets are placed on left side while liabilities and capital are on the right side B. REPORT FORM PRESENTATION Assets are placed on top of the paper while liabilities and capital are placed below.

ILLUSTRATIONS: A. INCOME STATEMENT JAM Travel & Tours Income Statement For the month ended January 31, 2009 Income Fees Income.. Expenses Rent Expense. P 60,000 Salaries Expense. 16,000 Supplies Expense. 2,000 Utilities Expense 13,000 Total Expenses Net Loss.. . P 20,000

P91,000 P13,850

Fig. 1. Single-Step Income Statement

B. BALANCE SHEET JAM Travel & Tours Balance Sheet January 31, 2009 Assets Current Assets Cash . Office Supplies Total Current Assets. . Fixed Assets Equipment. Total Assets Liabilities and Capital Liabilities Accounts Payable.. Notes Payable. . Total Liabilities.. Capital J. A. Mendoza, Capital ..... Total Liabilities and Capital. P 128,000 P159,000 P116,000 3,000 P119,000

P 40,000 P 159,000

P 1,000 30,000. P 31,000

Fig. 4. Balance Sheet (Report Form)

C. STATEMENT OF CHANGES IN OWNERS EQUITY JAM Travel & Tours Statement of Changes in Owners Equity For the Month Ended, January 31, 2009 J. A. Mendoza, Capital January 1, 2009 Less: J.A. Mendoza, Drawing Net investment Less: Net Loss J. A. Mendoza, Capital January3 1, 2009 P200,000 1,000 P199,000 71,000 P128,000

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