Steps in Preparing a Worksheet
In preparing a worksheet, the following steps must be followed:
Post Balances in Trial Balance Columns
First of all, the names of all ledger accounts with balances are written in the first column and their balances in their respective debit and credit columns of the trial balance. The trial balance columns are then totaled.
Post Adjusting Entries in Adjustment Columns
The necessary adjusting entries are posted in the adjustment columns. The title of any account that is debited or credited in the adjusting entries but not listed in the trial balance is recorded from the next line of the trial balance total.
The adjustments columns are totaled, after which the total of the debit column should be equal to the total of the credit column.
Enter Balances in Adjusting Trial Balance Column
The resulting balance is obtained from the trial balance, and the adjustment columns are as follows:
The resulting balance is recorded in the adjusting trial balance columns. The adjusting trial balance columns are totaled to demonstrate that no arithmetic errors have been made.
Complete Income Statement Columns
Determine Net Loss or Net Income
If the total of the credit column (income) is greater than the debit column (expense), this represents net income. The net income is recorded in the debit column to equalize the debit and credit columns of the income statement.
If the total of the debit column (expense) is greater than the credit column, it represents a net loss. The net loss is recorded in the credit column to equalize the debit and credit columns.
Complete Balance Sheet Columns
The balances of assets from the adjusting trial balance are transferred to the debit column of the balance sheet, and the balance of liabilities is transferred to the credit column. The net income is shown as a liability (credit column) and the net loss as an asset (debit column).
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About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.