Calculating
Adjustments & Completing the Worksheet
"The only errors are careless errors…"
When cash is either received by the firm or paid by the firm ahead of time (in advance), the original entry to book those advances will give rise to an adjusting entry. When this is the case, the adjusting entry is a deferral; the remaining adjustments are accruals. When analyzing adjusting entries, the accountant should ask the question: Is this an expense or a revenue? No adjusting entry will have as part of the entry the cash account. The following areas are associated with adjustments:
Supplies
(Deferred Expense)
Prepaid Insurance (Deferred Expense)
Depreciation of Certain Assets (Deferred Expense)
Wages (Accrued Expense)
*Six Panels of Adjustments link
The worksheet
is a schedule used to plan the financial statement presentation. It is
used to map the adjustments made and list all balances to be reported
in the financials (referred to as the adjusted trial balance). It is easy
to make calculation errors when adjusting the original trial balances
to the adjusted trial balances. Be careful with the numbers! Electronic
spreadsheets alleviate these errors, but if the lights go out, no compute…and
we are back with the calculator. The normal balances are tallied to confirm
debit and credit balances equate and are extended to the appropriate financial
statement columns to determine net income or net loss.
Site Content
- John Templeton, HCCS Accounting Instructor
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