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Work Sheet:

Learning Objectives:

  1. Define and explain work sheet.

  2. What are its advantages?

  3. Prepare a worksheet.

Definition and Explanation:

A work sheet is a large columnar sheet of paper, especially designed to arrange in a convenient systematic form all the accounting data required at the end of the period. The work sheet is not a part of the permanent accounting record but it is a working paper of accountants, prepared by pencil. If an error is made on the work sheet, it may be erased an corrected much more easily than an error on the formal accounting records. The work sheet is designed in a manner that it minimizes the chances of errors to the maximum possible extent. It brings into light many types of discrepancies which otherwise might be entered in the journal and posted to the ledger accounts.

It must be remembered that it is not necessary to write $ signs, decimal points or commas with the amounts entered on the work sheet. The satisfactory completion of work sheet provides considerable assurance that all the details of the end of period accounting procedures have been properly brought together. It also serves as the source from which formal financial statements are prepared and the adjusting and closing entries are made in the journal and then posted to the ledger.

We may further proceed with the help of an example.

Example of Work Sheet:

Sunshine is a trading concern. Its trial balance and adjustments are given below:

  Dr. Cr.
Cash 37080  
Accounts receivable 52320  
Notes receivable 24000  
Merchandise inventory on 1.1.2005 31650  
Prepaid insurance 4800  
Prepaid rent 4395  
Store supplies 1650  
Furniture and fixtures 13500  
Accumulated depreciation - furniture   3000
Office equipment 11700  
Accumulated depreciation office equipment   4500
Accounts payable   28600
Owner's equity   96000
Drawings 4500  
Purchases 180000  
Sales   289200
Sales returns and allowances 6000  
Purchases returns and allowances   2500
Freight inwards and customs duty 5750  
Sales salaries 34200  
Advertising expenses 3795  
Delivery expenses 2850  
Office expenses 3510  
Office salaries 3000  
Interest income   900

  424700 424700


  1. Merchandise inventory on 31.12.2005 was 40000.
  2. Rent expired during the year $2800.
  3. Insurance expired during the year $2500.
  4. Outstanding sales salaries $2100
  5. Insurance receivable $200.
  6. Stores supplies inventory on 31.12.2005 was $650.
  7. Depreciate furniture and fixture by 10% p.a. and office equipment by 20% p.a.
  8. Write off uncollectibles at $600.

The headings of the work sheet in our example for Sunshine consists of three parts:

  1. The name of the business.
  2. The title work sheet.
  3. The period of time covered.

The form of work sheet has an account title column and the money column arranged in five pairs of debit and credit columns. The main headings of the five set of money columns are:

  1. Trial balance.
  2. Adjustments.
  3. Adjusted trial balance.
  4. Income statement.
  5. Balance sheet.

These five sets of columns have been explained below:

Trial Balance:

The trial balance data may be assembled directly on the work sheet form or they may be prepared on another sheet first and then copied on the work sheet.

Adjustments Columns:

Students are advised to record the adjusting entries first on a separate sheet of paper before recording adjustments in the adjustment columns of work sheet. It will definitely make the procedure more simple for them. The adjusting entries for the adjustments given in the example are shown below:

      $ $
(a) Merchandise closing inventory Dr. 40,000  
       Income summary     40,000
(b) Rent expenses Dr. 2800  
       Prepaid rent     2800
(c) Insurance expenses Dr. 2500  
       Prepaid insurance     2500
(d) Sales salaries expenses Dr. 2100  
       Outstanding sales salaries     2100
(e) Interest receivable Dr. 200  
       Interest revenue     200
(f) Store supplies expenses Dr. 1000  
       Store supplies     1000
(g) Depreciation expenses - furniture & fixture Dr. 1350  
       Accumulated depreciation - furniture & fixture     1350
(h) Depreciation expenses - office equipment Dr. 2340  
       Accumulated depreciation - office equipment     2340
(i) Bed debt expenses Dr. 600  
       Accounts receivable     600

If the titles of some accounts in all adjusting entries are not included in the titles already appearing in the trial balance, they should be inserted below the trial balance totals in the title column. For example, the title not appearing in the trial balance are merchandise closing inventory, income summary, rent expenses, insurance expenses, outstanding expenses, outstanding sales salaries, store supplies expenses, depreciation expenses - furniture, depreciation expense - furniture, depreciation expense - equipment and bad debts.

Both the debit and credit parts of an adjusting should be inserted on the appropriate lines before going on to another adjustment. The sequence of adjustments is not important, except that there is a time and accuracy advantage in following the order in which the adjustments are assembled.

Adjusted Trial Balance Columns:

The amounts in the trial balance columns are combined with the amounts in the adjustments column and extended to the adjusted trial balance columns. For example, the prepaid rent in the debit column of trial balance is $4395 and in the adjustments column, it is in the credit column at $2800 (see adjusting entry), so the amount extended (written) in the debit column of adjusted trial balance will be $1595 (4395 - 2800).

The same procedure is continued until all the account balances have been extended to the adjusted trial balance columns. The debit and credit columns are then totaled to prove that no arithmetical errors have been made up to this point. Now, the adjusted trial balance will be a complete source of information for the preparation of financial statements.

Income Statement and Balance Sheet Columns:

The data in the adjusted trial balance columns are extended to one of the remaining four columns. The amounts of assets, liabilities, capital and drawings are extended to the balance sheet columns and the revenues and expenses are extended to the income statement columns.

In our example, the first account listed is cash and the balance appearing in the original trial balance debit column and in the adjusted trial balance debit column is 37080. Cash is an asset, it is listed on the balance sheet of the asset column. The balance of accounts receivable is extended in similar fashion. The balance of $51720 (adjusted balance) is extended to the debit column of balance sheet. The same procedure is continued until all the balances in adjusted trial balance are extended to appropriate columns.

After all the balances have been extended, each of the four columns is totaled. The net income or the net for the period is the amount of the difference between the totals of the two income statement columns. If the credit column total is greater than the debit column total, the excess is the income.

Keeping in view the above mentioned procedure the work sheet is prepared below:

Sun Shine
Work Sheet for the year ended 21.12.2005

  Account Title Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet
    Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
1 Cash 37080       37080       37080  
2 Accounts receivable 52320     i-600 51720       51720  
3 Notes receivable 24000       24000       24000  
4 Merchandise inv. 1.105 31650       31650   31650      
5 Prepaid insurance 4800     c-2500 2300       2300  
6 Prepaid rent 4395     b-2800 1595       1595  
7 Store supplies 1650     f-1000 650       650  
8 Furniture & fixture 13500       13500       13500  
9 Acc-deprec. - furniture   3000   g-1350   4350       4350
10 Office equipment 11700       11700       11700  
11 Acc-deprec. - equip.   4500   h-2340   6840       6840
12 Accounts payable   28600       28600       28600
13 Owner's equity   96000       96000       96000
14 drawings 4500       4500       4500  
15 Purchases 180000       180000   180000      
16 Sales   289200       289200   289200    
17 Sales ret. & allow. 6000       6000   6000      
18 Purchases ret. & allow.   2500       2500   2500    
19 Freight inward & cust. 5750       5750   5750      
20 Sales salaries exp. 34200   d-2100   36300   36300      
21 Advertising exp. 3795       3795   3795      
22 Delivery exp. 2850       2850   2850      
23 Office exp. 3510       3510   3510      
24 Office salaries 3000       3000   3000      
25 Interest income   900       900   900    
    424700 424700                
26 Rent exp.     b-2800   2800   2800      
27 Insurance exp.     c-2500   2500   2500      
28 Outstanding sales salaries       d2100   2100       2100
29 Interest receivable     e-200   200       200  
30 Interest revenue       e-200   200   200    
31 Store supplies exp.     f-1000   1000   1000      
32 Deprec. exp. furniture     g-1350   1350   1350      
33 Deprec. exp. equipment     h-2340   2340   2340      
34 Bad debts exp.     i-600   600   600      
35 Merchandise inv. 31.12.05     a-40000   40000     40000    
36 Income summary       a-40000   40000     40000  
        52890 52890 470690 470690        
                49355     49355
  Net Income             332800 332800 187245 187245




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