Preparing a Worksheet

A worksheet serves as a testing ground for adjusting and balancing ledger accounts, preparing them for the creation of financial statements. It includes:

1. Unadjusted trial balance: Enter the unadjusted balances of all accounts.

2. Adjusting entries: Record the necessary adjustments for end-of-period entries.

3. Adjusted trial balance: After adjusting entries, update the account balances to ensure debits equal credits.

4. Financial statement columns: Extend the balances to either the income statement or balance sheet columns, depending on the nature of the accounts (revenues/expenses to the income statement; assets/liabilities/equity to the balance sheet).

5. Net income or loss: Calculate net income or loss by comparing the totals of the income statement columns​​.

Uses of a Worksheet

• Prepares financial statements: The worksheet provides a draft for financial statements before formal entries are made.

• Helps with interim statements: Businesses can use a worksheet to prepare interim (monthly or quarterly) financial statements without closing the books.

• Adjusts for errors: It allows accountants to correct errors before finalizing entries​​.

This makes the worksheet a valuable tool for accountants in both planning and preparing formal records.