Discuss the benefits of the worksheet.
A worksheet can be referred to as an array of accounting data that accountants use to record information (Edward, K. 2006).The benefits of preparing a worksheet include:
- Reduces chance of forgetting an adjustment.
Worksheets are used by accountants as a tool to take into account every transaction including periodic adjustments that occur when transactions are done.Adjustments to the closed accounts in a structure manner following a certain format are well incorporated in the worksheet.
Preparing accounts by use of worksheet solves perennial problems of inaccuracy in data to prevent erroneous financial reporting. The worksheet does this by revealing arithmetic errors in the entry of the data.
- Ensures formality in preparation of accounting records.
Before the preparation of the worksheet, an adjusted trial balance has to be prepared. Basically, the formal steps have to be followed in order to complete the accounting cycle before finally preparing the preparation of a worksheet.
- Regular compliance
A financial spreadsheet enables organizations to prepare and report operating data that conforms to specific regulatory guidelines (Claudia, G.&Mark, W. L.2008).The worksheet is used to include essential information of the current accounting legislation which must be complied with by the company.
Explain how the financial reports are prepared from the worksheet.
Before a worksheet is prepared, the full accounting cycle has to be completed(Richard, E. 1996).Basically, the accounting cycle goes the following processes:
A worksheet is usually introduced by:
- Name of the company
- The title worksheet
- Time of accounting period covered.
Step in preparing a worksheet.
- Insertion of account balances in the trial balance columns.
This involves posting the balances from the trial balance the worksheet.
A typical Worksheet example resembles as follows:
WORKSHEET TO PREPARE FINANCIAL STATEMENTS
DECEMBER 31, 2005
|Account Title||Trial Balance||Adjustments||Adjusted Trial Balance||Income Statement||Balance Sheet.|
- Entering adjustments in the adjustment columns.
Adjustments may include depreciation, accrued rent/salaries, interest charges, unearned revenue etcetera.
- Entering the account balances in the adjusted trial balance columns.
This is the totaling of the pair of adjustments columns. The debit and credit parts of the same entry should be well denoted(Paul F, William, T. &Rita, C. (2007).The total adjusted debit and credit balances should equal.
- Summing the final statements.
The step involves totaling income statement and balance sheet columns. The net incomes/losses from both pairs of columns are the balancing figures. To balance the worksheet;
- First, total each of the four columns.
- Compute the difference between the two income statement and balance sheet columns.
Every account in the adjusted trial balance falls in the balance sheet account or the income statement account (Steve J., Roby S.&Greg J.2008).Revenue and expenses accounts are income statements figures while assets, liabilities, capital and drawings accounts are balance sheet figures.
- Proving the arithmetic accuracy:
This is last step. Proving the arithmetic accuracy only entails obtaining the net income or net loss. Net income/loss is equal to the difference between the debit and credit columns of the income statement.
- Richard, E. (1996).Business and Economics: Accounting worksheets to Accompany Advanced Financial Accounting (3rd ed). McGraw-Hill Companies.
- Paul F, William, T.&Rita, C. (2007).Fundamentals of Advanced Accounting. Cengage Learning.
- Claudia, G.&Mark, W. L.(2008).Fundamentals of accounting: Course 1.Cengage Learning.
- Edward, K. (2006).Accounting Ethics: Theories of accounting ethics and their dissemination. 2 Taylor & Francis,
- Steve J., Roby S.&Greg J.(2008). Managerial Accounting: A focus on Ethical decision making.(5th edn). Cengage Learning.