CHAPTER XXVII
THE WORK SHEET AND
SUMMARY STATEMENTS
Procedure Preliminary to Adjusting and Closing.—Before tracing the detail of the adjusting and closing entries through the books, explanation will be given of the usual method of insuring the accuracy of this periodic work preliminary to the formal closing of the books. This preliminary work comprises the technical procedure employed in drawing up the balance sheet and profit and loss statement before the books are closed. It thus brings about a summarization of the period’s results made outside the books instead of in them. Therefore, a proof of the accuracy and correctness of the work of adjusting and closing can be secured before the summarization entries are made in the books. After proof of accuracy has thus been secured, the statements are used as a guide in making the formal adjusting and closing entries.
The information for the balance sheet and profit and loss statements comes mostly from the regular monthly trial balance taken at the end of the period just before the adjusting entries are made. This trial balance must of course be modified in order to include the effect of the adjustments. For the purpose of incorporating the adjustments in the trial balance and then separating the accounts into the two groups, namely, those which are to be summarized in the profit and loss statement and those which are to be used for the balance sheet, a regular form is used known as the accountant’s “work sheet.” This form and the method of its use will now be explained.
The Work Sheet.—For the work sheet “analysis” paper is used, which is ruled in its simple form as shown in the illustration on [pages 226 and 227], space being provided for:
- 1. Account titles
- 2. Trial balance items
- 3. Adjustment items
- 4. Profit and loss items
- 5. Balance sheet items
For the purpose of illustration, a trial balance and a list of adjustments are given below, followed by the work sheet and the necessary explanatory detail.
The student must understand that the work sheet is no part of the formal accounting record, nor is the procedure employed by it a part of the formal work of closing the books. It is only a means by which a rough summarization of the period’s results may be made outside the regular accounting records and all the data needed for the formal statements be brought together. Its purpose is to secure and prove the accuracy of results before the formal adjusting and closing work is entered on the books. Where many or complicated adjustments are to be made, with a resulting probability of error and difficulty in an orderly arrangement of the adjusting entries, the method of the work sheet is almost indispensable. The formal adjusting entries are then made up from the adjustment columns of the work sheet.
Illustration
Trial Balance, December 31, 19—
| 1 | New York National Bank | $ 17,600.00 | ||
| 2 | Petty Cash | 100.00 | ||
| 3 | Notes Receivable | 15,000.00 | ||
| 4 | Trade Customers | 35,000.00 | ||
| 5 | Reserve for Doubtful Accounts | $ 875.00 | ||
| 6 | Liberty Bonds | 3,000.00 | ||
| 7 | Merchandise Inventory | 30,000.00 | ||
| 9 | Office Furniture and Fixtures | 2,800.00 | ||
| 10 | Depreciation Reserve Office Furniture and Fixtures | 700.00 | ||
| 11 | Store Furniture and Fixtures | 12,000.00 | ||
| 12 | Depreciation Reserve Store Furniture and Fixtures | 3,000.00 | ||
| 13 | Delivery Equipment | 4,500.00 | ||
| 14 | Depreciation Reserve Delivery Equipment | 2,250.00 | ||
| 15 | Buildings | 35,000.00 | ||
| 16 | Depreciation Reserve Buildings | 7,000.00 | ||
| 17 | Land | 15,000.00 | ||
| 18 | Notes Payable | 12,000.00 | ||
| 19 | Trade Creditors | 25,000.00 | ||
| 20 | Mortgages Payable | 17,500.00 | ||
| 21 | U. R. Smart, Capital | 90,000.00 | ||
| 22 | U. R. Smart, Personal | 10,500.00 | ||
| 24 | Sales | 195,000.00 | ||
| 25 | Sales Returns and Allowances | 1,850.00 | ||
| 26 | Purchases | 135,000.00 | ||
| 27 | Purchases Returns and Allowances | 5,400.00 | ||
| 28 | In-Freight and Cartage | 1,350.00 | ||
| 29 | Salesmen’s Salaries | 13,500.00 | ||
| 30 | Selling Supplies and Expense | 1,600.00 | ||
| 31 | Advertising | 4,800.00 | ||
| 32 | Out-Freight | 400.00 | ||
| 33 | Delivery Expense | 3,300.00 | ||
| 34 | Office Salaries | 5,000.00 | ||
| 35 | General Expense | 2,000.00 | ||
| 36 | Office Expense | 4,500.00 | ||
| 37 | Printing and Stationery | 750.00 | ||
| 38 | Taxes | 2,840.00 | ||
| 39 | Insurance | 1,750.00 | ||
| 40 | Interest Cost | 900.00 | ||
| 41 | Collection and Exchange | 85.00 | ||
| 42 | Sales Discount | 850.00 | ||
| 43 | Interest Income | 1,500.00 | ||
| 44 | Purchase Discount | 1,300.00 | ||
| 45 | Sub-Rentals Income | 650.00 | ||
| 46 | Special Police on Strike Duty | 1,200.00 | ||
| Total | $362,175.00 | $362,175.00 | ||