What is Accounting Worksheet?
Accounting Worksheet is a spreadsheet tool that records all accounting information and is used to prepare financial statements of the company at the end of the accounting cycle, thereby ensuring its financial accuracy.
- These accounting spreadsheets are designed mainly for internal purposes only where the external users of the company, like investors, creditors, etc., rarely get the chance to see the accounting worksheet of the company.
- Due to this, there is flexibility with the preparer of the accounting worksheet to modify its format to fit the demand of their internal and workflow requirements. So, this is the spreadsheet that helps in tracking each step of the accounting cycle of the company.Accounting Cycle Of The Company.Accounting Cycle refers to the process of recording transactions and summarizing them for the preparation of financial statements. The objective is to generate useful information in the form of three financial statements namely Income Statement, Balance Sheet and Cash Flows.
Components of Accounting Worksheet
There are five columns of the data generally, and each column of data lists the debit entries and the credit entries separately. The following are the five columns of the data in the accounting worksheet:
#1 – Unadjusted Trial Balance
The Unadjusted trial balanceUnadjusted Trial BalanceAn unadjusted trial balance is the account balances reported directly from the general ledger without adjusting for the year-end journal entries. It acts as a starting point for analyzing account balances and adjusting entries. column contains all the company’s assets, liability, expenses, and revenue accountsRevenue AccountsRevenue accounts are those that report the business's income and thus have credit balances. Revenue from sales, revenue from rental income, revenue from interest income, are it's common examples., which are used in a concerned year. The total of credit and the debit column of the unadjusted trial balance are equal.
#2 – Adjustments
All the accounts of the company, which requires the passing of the adjustment entry will get listed in the adjustment column. The total of credit and the debit column of the balance of the adjustments are equal.
#3 – Adjusted Trial Balance
The adjusted trial balanceAdjusted Trial BalanceAdjusted Trial Balance is a statement which incorporates all the relevant adjustments. Although it is not a part of financial statements, the adjusted balances are carried forward in the different reports that form part of financial statements. will be prepared by combining the entries of the previous two columns, Unadjusted trial balance, and adjustments. The total credit and the debit column of the adjusted trial balance are equal.
#4 – Income Statement
Income statementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements. column contains the values with respect to the expenses and revenue accounts only. In this case, if the value of total revenue exceeds the expense column, then the difference will be the net income of the year of the company as it is earning more revenues in the year than what it is spending on its expenses.
On the other hand, if the expenses total for the year exceeds the revenue total, then the difference will be the net lossNet LossNet loss or net operating loss refers to the excess of the expenses incurred over the income generated in a given accounting period. It is evaluated as the difference between revenues and expenses and recorded as a liability in the balance sheet. of the year of the company as it is spending more on its expenses than what it is earning. In either of the cases, balancing entry is required to be passed by the company for the difference.
#5 – Balance Sheet
Balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company. column contains the values with respect to the assets, liabilities, and owner’s capital only. The total credit and the debit column of the Balance sheet will be equal.
Example of Accounting Worksheet
Company XYZ Ltd. runs a bakery business. During the year before preparing the final statements of accounts, it decided to develop an accounting spreadsheet as an intermediate step. The unadjusted trial balance of the company is given in column 1. During the year, two adjustments were made, which includes payment of rent of $1,500 in advance and the depreciation expense of $2,000. Prepare an accounting worksheet.
Advantages of Accounting Worksheet
- With the help of the accounting spreadsheet, it becomes easy to complete the process of preparation of financial statements of the firm step-by-step. It is one of the essential tools for the development of the income statement and the balance sheet of the company. While the use of the same is not compulsory, it is a beneficial step.
- It ensures that the bookkeeper of the company does not forget while preparing the books to pass the adjustments required.
- It provides information about the financial health of the company before the actual financial statement of the company is prepared.
They are prepared manually and separately from the company’s accounting database, so there are chances that the accounting worksheets made may contain the errors or the inaccuracies in the formula. It is necessary for the concerned person to carefully review them before relying on summary totals.
An accounting spreadsheet of the company is a document that is used within the accounting departmentThe Accounting DepartmentThe accounting department looks after preparing financial statements, maintaining a general ledger, paying bills, preparing customer bills, payroll, and more. In other words, they are responsible for managing the overall economic front of the business. for calculating and analyzing the account balances. A worksheet is a useful tool in order to ensure that the accounting entriesThe Accounting EntriesAccounting Entry is a summary of all the business transactions in the accounting books, including the debit & credit entry. It has 3 major types, i.e., Transaction Entry, Adjusting Entry, & Closing Entry. are correct. All the accounts of the accounting records of the company are shown in the accounting worksheet in at-least one of the columns, which is an essential step for preventing the errors when the company’s final financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels. are prepared.
So, it shows all of the significant steps of the accounting cycle of the company side by side. While the use of the same is not compulsory, it is one of the essential tools for the preparation of the income statement and the balance sheet of the company.
This has been a guide to What is Accounting Worksheet and its Definition. Here we discuss components of accounting worksheet along with its example, advantages, and disadvantages. You can learn more about accounting from the following articles –