Chapter4Outline

Chapter4Outline - CHAPTER REVIEW Preparing a Worksheet...

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CHAPTER REVIEW Preparing a Worksheet 1. (S.O. 1) The steps in preparing a work sheet are: a. Prepare a trial balance on the work sheet. b. Enter the adjustments in the adjustments columns. c.Enter adjusted balances in the adjusted trial balance columns. d. Extend adjusted trial balance amounts to appropriate financial statement columns. e. Total the statement columns, compute the net income (or loss), and complete the work sheet. 2. A work sheet is a multiple-column form that may be used in the adjustment process and in preparing financial statements. The basic form of a work sheet consists of the following columns: Account Titles Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. 3. For each account in the work sheet, the amount in the adjusted trial balance columns is equal to the account balance that will appear in the ledger after the adjusting entries have been journalized and posted. 4. After the work sheet has been completed the statement columns contain all data that are re- quired for the preparation of financial statements. The income statement is prepared from the income statement columns, and the retained earnings statement and balance sheet are pre- pared from the balance sheet columns. 5. Using a work sheet accountants can prepare financial statements before adjusting entries are journalized and posted. 6. A work sheet is not a journal and it cannot be used as a basis for posting to ledger accounts. Closing Entries 7. (S.O. 2) Closing entries formally recognize in the ledger the transfer of net income (or loss) and dividends to retained earnings as shown in the retained earnings statement.
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