Adjustment Data, December 31, 19—
| Inventory of Merchandise | $26,500.00 |
| Estimated Depreciation: | |
| Office Furniture and Fixtures, 10% of original cost | |
| Store Furniture and Fixtures, 10% of original cost | |
| Delivery Equipment, 16⅔% of original cost | |
| Buildings, 4% of original cost | |
| Doubtful Accounts, ¼% of Net Sales | |
| Accrued Income: | |
| Interest Accrued on Notes Receivable | 150.00 |
| Deferred Expenses: | |
| Insurance Unexpired | 250.00 |
| Advertising Paid in Advance | 300.00 |
| Printing and Stationery Supplies on hand | 150.00 |
| Selling Supplies and Expense | 200.00 |
| Accrued Expenses: | |
| Taxes | 340.00 |
| Salesmen’s Salaries | 175.00 |
| Interest on Notes Payable | 50.00 |
| Special Police on Strike Duty | 150.00 |
| Office Salaries | 100.00 |
| Deferred Income: | |
| Sub-Rentals Paid in Advance | 50.00 |
The initial step in the use of the work sheet is to enter the trial balance in the first two columns, as shown on [pages 226, 227]. The accounts in the trial balance should be arranged in classified form before being entered on the work sheet, as this aids greatly in drawing up the statements. The various adjustment entries, debit and credit, which are almost the same as in the ledger, are then entered in the adjustment columns. The work sheet may be looked upon somewhat as a ledger, entries in whose accounts are to be made horizontally instead of vertically. The analogy to the ledger cannot be carried too far, however. It should be noted that when it is necessary to adjust any account in the trial balance by increasing its debit, this is accomplished by entering the item in the debit adjustment column on the same line with the account to be adjusted. On the other hand, if a subtraction is to be made from a debit amount shown in the trial balance, the amount to be deducted is entered in the credit adjustment column. A complete debit and credit entry must be made in the adjustment columns for each adjustment.
There is given below a debit and credit list of these entries as they are to appear on the work sheet. The manner of making and cross-indexing these adjustment entries is indicated by the cross-reference letters used. It will be noted that, while in most instances these entries are exactly the same as the formal adjusting journal entries, there is a difference in the case of the merchandise inventories.
The student should understand that the list of adjustment entries given below does not appear anywhere in the formal accounting records. It is shown here in journal form only to indicate the debits and credits of the entries to the work sheet. Entries of the adjustment transactions are always made direct to the work sheet, never being set up in journal form. Each of these entries should be traced into the adjustment columns of the work sheet. The figures in parentheses just preceding the debit and credit amounts are, of course, not ledger folios but refer to the similarly numbered items on the work sheet so that the student will have no difficulty in tracing them.
| (a) | Merchandise Inventory—Final | ( 8) | 26,500.00 | |
| (a) Merchandise Inventory—Final | ( 8) | 26,500.00 | ||
| (b) | Depreciation Office Furniture and Fixtures | (51) | 280.00 | |
| (b) Depreciation Reserve Office Furniture and Fixtures | (10) | 280.00 | ||
| (c) | Depreciation Store Furniture and Fixtures | (51) | 1,200.00 | |
| (c) Depreciation Reserve Store Furniture and Fixtures | (12) | 1,200.00 | ||
| (d) | Depreciation Delivery Equipment | (51) | 750.00 | |
| (d) Depreciation Reserve Delivery Equipment | (14) | 750.00 | ||
| (e) | Depreciation Buildings | (51) | 1,400.00 | |
| (e) Depreciation Reserve Buildings | (16) | 1,400.00 | ||
| (f) | Bad Debts | (50) | 482.88 | |
| (f) Reserve for Doubtful Accounts | ( 5) | 482.88 | ||
| (g) | Interest Income (Accrued) | (52) | 150.00 | |
| (g) Interest Income | (43) | 150.00 | ||
| (h) | Insurance (Deferred) | (53) | 250.00 | |
| (h) Insurance | (39) | 250.00 | ||
| (i) | Advertising (Deferred) | (53) | 300.00 | |
| (i) Advertising | (31) | 300.00 | ||
| (j) | Printing and Stationery (Deferred) | (53) | 150.00 | |
| (j) Printing and Stationery | (37) | 150.00 | ||
| (k) | Selling Supplies and Expense (Deferred) | (53) | 200.00 | |
| (k) Selling Supplies and Expense | (30) | 200.00 | ||
| (l) | Taxes | (38) | 340.00 | |
| (l) Taxes (Accrued) | (54) | 340.00 | ||
| (m) | Salesmen’s Salaries | (29) | 175.00 | |
| (m) Salesmen’s Salaries (Accrued) | (54) | 175.00 | ||
| (n) | Interest Cost | (40) | 50.00 | |
| (n) Interest Cost (Accrued) | (54) | 50.00 | ||
| (o) | Special Police on Strike Duty | (46) | 150.00 | |
| (o) Special Police on Strike Duty (Accrued) | (54) | 150.00 | ||
| (p) | Office Salaries | (34) | 100.00 | |
| (p) Office Salaries (Accrued) | (54) | 100.00 | ||
| (q) | Sub-Rentals Income | (45) | 50.00 | |
| (q) Sub-Rentals Income (Deferred) | (55) | 50.00 | ||
Form 23. Work Sheet
In order to set up some of these adjusting entries, it becomes necessary to add some new accounts on the work sheet. The student will note these appended at the end of the regular trial balance shown on the work sheet. They are, first, Bad Debts and Depreciation, under the latter of which the detail of the fixed assets subject to depreciation is given, and then follow in order the balance sheet classifications of Accrued Income, Deferred Charges to Operation, Accrued Expenses, and Deferred Income, provision being made to show under each of these titles the detail of the accounts involved.