Task Team of FUNdaMENTAL aCCOUNtIng School of Business. Sun Yat-sen University unad justed balances 3. Adjusted trial balance: the results of combining the unadjusted trial balance and adjustments columns are entered here 4. Income statement. those accounts that belong on the income statement are extended from the adjusted trial balance columns to the income statement columns 5. Balance sheet and statement of owner's equity: those accounts that belong or these financial statements are extended from the ad justed trial balance into the last two columns of the worksheet How to prepare the worksheet The procedure for preparing worksheets is as follows 1. enter the unadjusted trial balance and ascertain the equal ity of debits and cred its If the trial balance is in balance, it suggests accuracy in the accounts, although this not a guarantee 2. Enter the necessary adjustments into the two adjustments columns. Be sure that debits equal credits for each adjustment. It is common practice to use an identify ing letter to relate the debit to the cred it of each adjustment. Remember that the purpose of adjusting entries is to bring the accounts to their proper balances and to ensure that expenses are recorded in the period that they are incurred and revenues are recorded when they are earned 3. Enter the correct amounts in the adjusted trial balance columns by summing the amounts in the unadjusted trial balance columns with the amounts in the adjustment columns. The amounts int the adjusted trial balance are the same as those in the accounts of the financ ial statements as a check, you should foot the two adjusted trial balance columns and ensure that total debits still equal total credits 4. Extent the adjusted accounts to the income statement or balance sheet columns For each item, decide if it is a balance sheet account or an income statement account. Then copy debit balances to the appropriate debit column and credit balances to the appropriate credit column 5. Footing of the income statement and balance sheet columns There are three different situations The income statement columns are equal, means that revenues equal expenses and there is no net income or net loss. In this case there is no change in owners equity The income statement cred it column exceeds the debit column the difference represents net income for the period The income statement debit column exceeds the credit column the difference represents a net lossTask Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University unadjusted balances. 3. Adjusted trial balance: the results of combining the unadjusted trial balance and adjustments columns are entered here. 4. Income statement: those accounts that belong on the income statement are extended from the adjusted trial balance columns to the income statement columns. 5. Balance sheet and statement of owner’s equity : those accounts that belong on these financial statements are extended from the adjusted trial balance into the last two columns of the worksheet. How to prepare the worksheet? The procedure for preparing worksheets is as follows. 1. enter the unadjusted trial balance and ascertain the equality of debits and credits. If the trial balance is in balance, it suggests accuracy in the accounts, although this not a guarantee. 2. Enter the necessary adjustments into the two adjustments columns. Be sure that debits equal credits for each adjustment. It is common practice to use an identifying letter to relate the debit to the credit of each adjustment. Remember that the purpose of adjusting entries is to bring the accounts to their proper balances and to ensure that expenses are recorded in the period that they are incurred and revenues are recorded when they are earned. 3. Enter the correct amounts in the adjusted trial balance columns by summing the amounts in the unadjusted trial balance columns with the amounts in the adjustment columns. The amounts int the adjusted trial balance are the same as those in the accounts of the financial statements as a check, you should foot the two adjusted trial balance columns and ensure that total debits still equal total credits. 4. Extent the adjusted accounts to the income statement or balance sheet columns. For each item, decide if it is a balance sheet account or an income statement account. Then copy debit balances to the appropriate debit column and credit balances to the appropriate credit column. 5. Footing of the income statement and balance sheet columns. There are three different situations: The income statement columns are equal, means that revenues equal expenses and there is no net income or net loss. In this case there is no change in owner’s equity. The income statement credit column exceeds the debit column. the difference represents net income for the period. The income statement debit column exceeds the credit column ,the difference represents a net loss