06 Apr What is an Accounting Worksheet?
An accounting worksheet is a tool used to ensure that the financial statements prepared by a business at the end of an accounting period are accurate and do not contain any errors. It is an intermediate step in the preparation of a firm’s financial statements.
What does accounting worksheet mean?
An accounting worksheet’s main purpose is to ensure that the bookkeeper does not forget to make the required adjustments when drawing up a firm’s income statement and balance sheet.
Here is how this purpose is achieved. A column on the left of the accounting worksheet lists the main account titles. This is followed by five additional columns, each of which is divided into two parts – debit and credit.
The five columns of data, each of which list debit entries and credit entries separately are:
- Unadjusted trial balance – this contains all the asset, liability, revenue, and expense accounts that are used in the year. The total of debits and credits are equal.
- Adjustments – every account that requires an adjustment entry will be listed here. An example is an entry for depreciation of the firm’s long-term assets. The depreciation for the year will appear as a debit while the credit entry will appear under the accumulated depreciation account. Again, the total of debit entries and credit entries will be equal.
- Adjusted trial balance – this third column is the result of the entries in the previous two columns. Total debits will equal the total credits.
- Income statement – the income statement column will contain only the revenue and expense accounts. If the total of the revenue (credit) column exceeds the expense (debit) column, the difference is the net income for the year. However, if the expenses exceed the revenue, the net result is a loss. A balancing entry will have to be made in either case.
- Balance sheet – assets, liabilities, and the owner’s capital is reflected in this column. The total of the debits will equal the total of the credit entries.
Remember that all the accounts in the company’s accounting records find their way to the accounting worksheet. This essential step prevents errors in the preparation of the firm’s financial statements.
Example of an accounting worksheet
Newcomb Cleaners, a provider of house cleaning services, is in the process of preparing its financial statements for 2017. As an intermediate step, it prepares an accounting worksheet.
Newcomb Cleaners – Accounting Worksheet
December 31, 2017.
An accounting worksheet helps to complete the process of preparing a firm’s financial statements in a step-by-step manner. It is an essential tool in the preparation of a firm’s income statement and balance sheet.
An accounting worksheet helps the bookkeeper to prepare the firm’s financial statements. While it is not compulsory to prepare one, it is a very useful intermediate step.