After preparing adjusting entries, let us now move on to worksheets. Preparing worksheets is also one of the topic included for the fourth quarter in my bookkeeping class that's why it is just right for us to take a look on it.

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A worksheet also known as the extended trial balance is a business form containing multiple columns that is sometimes prepared in the concluding stages of accounting cycle. It is prepared after unadjusted trial balance is extracted from the ledgers' balances. The major purpose of the worksheet is to incorporate adjustments to the closed accounts in a structured manner following a certain format. It is an optional document prepared mostly for internal use so that management can understand what adjustments are made, what accounts are affected and by what amount. There are five    sets of columns on the right of account titles where each set contains two sub-columns i.e. debit and credit in the following order:

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1. Trial balance or unadjusted trial balance [2 columns - 1 debit, 1 credit] : in this column, amounts of items of ledger balance or trial balance like expenses, income, drawing, assets, capital, reserve and liabilities are recorded by following the rule of trial balance. It is also known as unadjusted trial balance.

2. Adjustments [2 columns - 1 debit, 1 credit] : In this column, amounts of adjustments are recorded by following the rule of adjustment entry.

3. Adjusted trial balance [2 columns - 1 debit, 1 credit] : This column is the outcome of unadjusted trial balance and adjustments.

4. Cost of Sales [2 columns - 1 debit, 1 credit] : In this column, the accumulated total of all costs used to create a product or service, which has been sold is recorded. The cost of sales line item appears near the top of the income statement, as a subtraction from net sales. The result of this calculation is the gross margin earned by the reporting entity.

5. Income Statement [2 columns - 1 debit, 1 credit] : In this column, amount of revenue expenses and income are recorded from adjustment trial balance to ascertain net income or net loss.

6. Balance sheet [2 columns - 1 debit, 1 credit] : In this column, amount of assets, drawing, net loss, net income, liabilities, capital, reserves and surplus are separated from the adjusted trial balance and recorded.

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Completing the worksheet

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1. Copy the figures from your trial balance into the worksheet (columns 1 and 2) and total the columns.

2. Enter balance day adjustments (column 3 and 4) and total the columns making sure that Dr equals Cr. Each adjustment should also be numbered and referenced below the worksheet.

3. Adjust the trial balance figures (columns 1 and 2) with the balance day adjustments (columns 3 and 4) and place the totals in adjusted trial balance (columns 5 and 6).

4. Sort each figure in the adjusted trial balance (columns 5 and 6) into profit or loss, and transfer to the income statement (columns 7 to 10) or balance sheet (columns 11 and 12) accordingly.

5. Balance the worksheet: Total the trading columns (columns 7 and 8). The difference between the totals is the gross profit or loss. If the total credits exceed debits, a gross profit has been earned. At the bottom of the worksheet write Gross profit in the account name column, and enter the amount as a debit in Trading (column 7) and a credit in Profit and Loss (column 10). If the total debits exceed credits, a gross loss has been made. At the bottom of the worksheet write Gross loss in the account name column, and enter the amount as a credit in Trading (column 8) and a debit in Profit and Loss (column 9). Total the trading columns (column 7 and 8) to make sure they balance.

6. Total the profit and loss columns (columns 9 and 10). The difference between the totals is the net profit or loss.  If total credits exceed total debits, a net profit has been earned.

7. At the bottom of the worksheet write Net Profit in the account name column, and enter the amount in the debit side of the Profit columns (column 9) and credit balance in the Balance sheets columns (column 12).  If total debits exceed total credits, a net loss has been made.

8. At the bottom of the worksheet, write Net Loss in the account name column, and enter the net loss in the credit side of the Profit columns (column 10) and debit balance in the Balance sheets columns (column 11).  Total the balance sheet columns (columns 11 and 12). The total debits should equal the credits. If not you should check all of your work.

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Ref: http://financereading.com/steps_in_prep aring_the_worksheet.htm

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Below is a sample of the 12-column worksheet provided by Mr. Randy Palestina, my bookkeeping teacher. I hope this helps in further understanding the topic.