LA VERDAD CHRISTIAN COLLEGE

LECTURE FOR FUNDAMENTALS OF

FINANCIAL ACCOUNTING
“WORKSHEET”
JANUARY 03, 2023
LA VERDAD CHRISTIAN COLLEGE
WORKSHEET - Accountants use this to help transfer data from the
unadjusted Trial Balance to the financial statements . This multi-column
document provides an efficient way to summarize the data for financial
statements. The worksheet simplifies the adjusting and closing process. It is a
summary device used by accountants for their convenience.

Example of preparing the worksheet for merchandising concern is the

unadjusted Trial Balance as of Dec. 31, 2021 . The following are the account
to be adjusted:
a. Remaining prepaid insurance was only P4,600 as of Dec. 31, 2021
b. Office supplies cost of inventory at the end of accounting period was P
16,960
c & d Annual depreciation for building and office equipment is P26,000 &
P22,000 respectively .
e. Accrued interest for the long term loans as of Dec. 31, 2021 was P38,400
 LA VERDAD CHRISTIAN COLLEGE
R. SANTOS COMPANY
WORKSHEET
FOR THE YEAR ENDED DECEMBER 31, 2021

TRIAL BALANCE ADJUSTMENTS INCOME STATEMENT BALANCE SHEET

ACCOUNT TITLE DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
CASH 304,500.00 304,500.00

ACCOUNTS RECEIVABLE 484,200.00 484,200.00

MERCHANDISE INVENTORY 528,000.00 528,000.00 483,000.00 483,000.00

OFFICE SUPPLIES 44,400.00 b. 27,440 16,960.00
PREPAID INSURANCE 13,800.00 a. 9,200 4,600.00
LAND 145,000.00 145,000.00
BUILDING 202,600.00 202,600.00
ACCU. DEP. -BUILDING 56,500.00 c. 26,000 82,500.00
OFFICE EQUIPMENT 86,000.00 86,000.00
ACCU. DEP. - OFF. EQPT 28,000.00 d. 22,000 50,000.00
ACCOUNTS PAYABLE 206,830.00 206,830.00
SALARIES PAYABLE 20,000.00 20,000.00
INTEREST PAYABLE e.38,400 38,400.00
LONG TERM LOANS PAYABLE 480,000.00 480,000.00
R. SANTOS CAPITAL 593,920.00 593,920.00
WITHDRAWALS 200,000.00 200,000.00
SALES 2,463,500.00 2,463,500.00
SALES RET. & ALLOW. 27,500.00 27,500.00
SALES DISCOUNT 42,750.00 42,750.00
PURCHASES 1,264,000.00 1,264,000.00

PURCHASES RET. & ALLOW. 56,400.00 56,400.00

PURCHASES DISCOUNT 21,360.00 21,360.00
TRANSPORTATION IN 82,360.00 82,360.00
SALARIES EXPENSE 396,000.00 396,000.00
SUPPLIES EXPENSE b. 27,440 27,440.00
INSURANCE EXPENSE a. 9,200 9,200.00

TRANSPORTATION OUT 57,400.00 57,400.00

UTILITIES EXPENSE 48,000.00 48,000.00

DEP. EXPENSE - BUILDING c. 26,000 26,000.00

DEP. EXPENSE - OFF. EQPT. d. 22,000 22,000.00

INTEREST EXPENSE e. 38,400 38,400.00
TOTALS 3,926,510.00 3,926,510.00 123,040 123,040 2,569,050.00 3,024,260.00 1,926,860.00 1,471,650.00
PROFIT 455,210.00 455,210.00
3,024,260.00 3,024,260.00 1,926,860.00 1,926,860.00
 LA VERDAD CHRISTIAN COLLEGE
AJUSTING ENTRIES FOR ABC COMPANY

DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

2021
Dec. 31 Insurance Expense 9,200.00
Prepaid Insurance 9,200.00
To correct the balance of prepaid insurance

31 Office supplies expense 27,440.00

Office supplies 27,440.00
To correct balance of office supplies
based on the result of count on hand

31 Depreciation expense - building 26,000.00

Accumulated depreciation- building 26,000.00
To take up annual depreciation expense

31 Depreciation expense - office equipment 22,000.00

Accumulated depreciation- office eqpt. 22,000.00
To take up annual depreciation expense

31 Interest expense 38,400.00

Interest payable 38,400.00
To take up accrued interest on loans
payable
LA VERDAD CHRISTIAN COLLEGE
R. SANTOS COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2021

NET SALES
Gross Sales 2,463,500.00
Less : Sales returns & allowances 27,500.00
Sales Discount 42,750.00 70,250.00
Net Sales 2,393,250.00

COST OF SALES
Merchandise Inventory, 01/01.2021 528,000.00
Purchases 1,264,000.00
Less: Purchases returns and allowances 56,400.00
Purchases discounts 21,360.00 77,760.00
Net purchases 1,186,240.00
Transportation In 82,360.00
Net Cost of Purchases 1,268,600.00
Goods Available for sale 1,796,600.00
Less : Merchandise Inventory 12/31/2021 483,000.00
Cost of Sales 1,313,600.00
GROSS PROFIT 1,079,650.00
OPERATING EXPENSES
SALARIES EXPENSE 396,000.00
SUPPLIES EXPENSE 27,440.00
INSURANCE EXPENSE 9,200.00
TRANSPORTATION OUT 57,400.00
UTILITIES EXPENSE 48,000.00
DEP. EXPENSE - BUILDING 26,000.00
DEP. EXPENSE - OFF. EQPT. 22,000.00

Total Operating Expenses 586,040.00

Operating Profit 493,610.00
Less: Finance Cost 38,400.00
Net Profit 455,210.00
LA VERDAD CHRISTIAN COLLEGE
R. SANTOS COMPANY

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2021

R. SANTOS CAPITAL, 1/1/2021 593,920.00

ADD: NET PROFIT 455,210.00

TOTAL 1,049,130.00

Less: WITHDRAWALS 200,000.00

R. SANTOS CAPITAL, 12/31/2021 849,130.00

LA VERDAD CHRISTIAN COLLEGE
R. SANTOS COMPANY
BALANCE SHEET
AS OF DECEMBER 31, 2021

ASSETS
CURRENT ASSETS
CASH 304,500.00

ACCOUNTS RECEIVABLE 484,200.00

MERCHANDISE INVENTORY 483,000.00
OFFICE SUPPLIES 16,960.00
PREPAID INSURANCE 4,600.00
Total Current assets 1,293,260.00
PROPERTY, PLANT & EQUIPMENT (NET)
LAND 145,000.00
BUILDING 202,600.00
LESS: ACCU. DEP. -BUILDING 82,500.00 120,100.00

OFFICE EQUIPMENT 86,000.00

LESS: ACCU. DEP. - OFF. EQPT 50,000.00 36,000.00 301,100.00

TOTAL ASSETS 1,594,360.00

LIABILITIES

CURRENT LIABILITIES
ACCOUNTS PAYABLE 206,830.00
SALARIES PAYABLE 20,000.00
INTEREST PAYABLE 38,400.00
TOTAL CURRENT LIABILITIES 265,230.00

NON-CURRENT LIABILITIES
LOANS PAYABLE 480,000.00

TOTAL LIABILITIES 745,230.00

OWNER'S EQUITY

R. SANTOS, CAPITAL, DEC. 31 849,130.00

TOTAL LIABILITIES AND OWNER'S EQUITY 1,594,360.00

 LA VERDAD CHRISTIAN
COLLEDGE
CLOSING ENTRIES FOR ABC COMPANY : CLOSING ENTRY METHOD

DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

2021
Dec. 31 MERCHANDISE INVENTORY , END 483,000.00
SALES 2,463,500.00
PURCHASES RETURNS AND ALLOWANCES 56,400.00
PURCHASES DISCOUNTS 21,360.00
INCOME SUMMARY 3,024,260.00
To close temporary accounts with credit
balances and to establish the ending
merchandise inventory

31 INCOME SUMMARY 2,569,050.00

MERCHANDISE INVENTORY, BEGINNING 528,000.00
SALES RETURNS AND ALLOWANCES 27,500.00
SALES DISCOUNTS 42,750.00
PURCHASES 1,264,000.00
TRANSPORTATION IN 82,360.00
SALARIES EXPENSE 396,000.00
OFFICE SUPPLIES EXPENSE 27,440.00
INSURANCE EXPENSE 9,200.00
TRANSPORTATION OUT 57,400.00
UTILITIES EXPENSE 48,000.00
DEP. EXPENSE - BUILDING 26,000.00
DEP. EXPENSE - OFF. EQPT. 22,000.00
INTEREST EXPENSE 38,400.00
To close temporary accounts with debit
balances and to remove beginning
inventory

31 INCOME SUMMARY 455,210.00

R.SANTOS, CAPITAL 455,210.00
To close the Income Summary account

31 R.SANTOS, CAPITAL 200,000.00

R. SANTOS , WITHDRAWALS 200,000.00
To close the withdrawal account
LA VERDAD CHRISTIAN COLLEGE
R. SANTOS COMPANY
POST-CLOSING TRIAL BALANCE
AS OF DECEMBER 31, 2021

DEBIT CREDIT

CASH 304,500.00

ACCOUNTS RECEIVABLE 484,200.00

MERCHANDISE INVENTORY 483,000.00

OFFICE SUPPLIES 16,960.00

PREPAID INSURANCE 4,600.00

LAND 145,000.00
BUILDING 202,600.00

ACCU. DEP. -BUILDING 82,500.00

OFFICE EQUIPMENT 86,000.00

ACCU. DEP. - OFF. EQPT 50,000.00

ACCOUNTS PAYABLE 206,830.00

SALARIES PAYABLE 20,000.00

INTEREST PAYABLE 38,400.00

LONG TERM LOANS PAYABLE 480,000.00

R. SANTOS CAPITAL 849,130.00

TOTAL 1,726,860.00 1,726,860.00
 LA VERDAD CHRISTIAN COLLEGE
ANSWERS ON EXERCISES FOR TRANSPORTATION COST &
DEFERRALS/ACCRUALS

TRANSP. PUR. RET. TRADE PUR. RET. NET TRANS. TOTAL ACCOUNTS TRANSP. CASH

NET DISCOUN
LIST PRICE FOB TERMS COST & ALLOW. CREDIT TERMS DISCOUNT INVOICE & ALLOW. PURCHASES IN PURCHASES PAYABLE PAID T TO BE PAID

224,000.00 Shipping point- freight collect 4,000.00 21,000.00 2/10, n/30 30% 156,800.00 21,000.00 135,800.00 4,000.00 139,800.00 135,800.00 2,716.00 133,084.00

126,000.00 Destination- freight prepaid 9,000.00 - 1/10, n/30 20% 100,800.00 - 100,800.00 - 100,800.00 100,800.00 1,008.00 99,792.00

90,000.00 Shipping point- freight prepaid 2,000.00 7,000.00 2/10. n/30 - 90,000.00 7,000.00 83,000.00 2,000.00 85,000.00 85,000.00 1,660.00 83,340.00

-
41,000.00 Destination- freight collect 1,000.00 9,000.00 n/30 25% 30,750.00 9,000.00 21,750.00 - 21,750.00 20,750.00 1,000.00 20,750.00

357,000.00 Destination- freight prepaid 14,000.00 24,000.00 3/10, n/30 20% 285,600.00 24,000.00 261,600.00 - 261,600.00 261,600.00 7,848.00 253,752.00
LA VERDAD CHRISTIAN COLLEGE
1 PURCHASES 156,800.00
TRANSPORTATION IN' 4,000.00
PURCHASES RETURNS & ALLOWANCES 21,000.00
ACCOUNTS PAYABLE 135,800.00
CASH 4,000.00

ACCOUNTS PAYABLE 139,800.00

PURCHASES DISCOUNT 2,716.00
CASH 133,084.00

2 PURCHASES 100,800.00
ACCOUNTS PAYABLE 100,800.00

ACCOUNTS PAYABLE 100,800.00

PURCHASES DISCOUNT 1,008.00
CASH 99,792.00

3 PURCHASES 90,000.00
TRANSPORTATION IN' 2,000.00
PURCHASES RETURNS & ALLOWANCES 7,000.00
ACCOUNTS PAYABLE 85,000.00

4 PURCHASES 30,750.00
PURCHASES RETURNS & ALLOWANCES 9,000.00
ACCOUNTS PAYABLE 20,750.00
CASH 1,000.00

ACCOUNTS PAYABLE 20,750.00

CASH 20,750.00

5 PURCHASES 285,600.00
PURCHASES RETURNS & ALLOWANCES 24,000.00
ACCOUNTS PAYABLE 261,600.00

ACCOUNTS PAYABLE 261,600.00

PURCHASES DISCOUNT 7,848.00
CASH 253,752.00
LA VERDAD CHRISTIAN COLLEGE
DEFERRALS AND ACCRUALS
Deferral is the postponement of the recognition of an expense already paid but
not yet incurred or of revenue already collected but not yet earned. The
adjustment decreases the balance sheet account and increases an income
statement account. In the cases below, deferrals would be needed:
1.Allocating assets to expense to reflect expenses incurred during the
accounting period ex. Prepaid expenses, supplies and depreciation
2.Allocating revenues received in advance to revenue to reflect revenues
earned during the accounting period ex.
Accrual – is the recognition of an expense already incurred but unpaid or
revenue earned but uncollected. This adjustment increases both a balance
sheet and an income statement account. In the cases below , accruals would
be needed:
1.Accruing expenses to reflect expenses incurred during the accounting period
that are unpaid and unrecorded
2.Accruing revenues to reflect revenues earned during the accounting period
that are uncollected and unrecorded .
LA VERDAD CHRISTIAN COLLEGE
Example :
1.Prepaid rent – ABC co. paid in advance the rental from June 1, 2022 to May
31, 2023 for P120,000. Required adjusting entry on Dec. 31, 2022:
DEBIT CREDIT
Entry made: Prepaid Rent 120,000
Cash 120,000
Adjusting entry: Rent Expense 70,000
Prepaid Rent 70,000
2. Prepaid Insurance - ABC co. paid in advance the insurance for building from
August 1, 2022 to January 31, 2023 for P60,000. Required adjusting entry on
Dec. 31, 2022: DEBIT CREDIT
Entry made: Prepaid Insurance 60,000
Cash 60,000
Adjusting entry: Insurance Expense 50,000
Prepaid Insurance 50,000
LA VERDAD CHRISTIAN COLLEGE
Example :
3. Supplies – ABC co. paid Supplies on June 1, 2022 for P20,000 . On Dec.
31,2022 , inventory of supplies showed cost of P5,000 on hand. Required
adjusting entry on Dec. 31, 2022:
DEBIT CREDIT
Entry made: Supplies 20,000
Cash 20,000
Adjusting entry: Supplies Expense 15,000
Supplies 15,000
4. Unearned revenue - ABC co. received advanced payment for rental of leased
office spaces from August 1, 2022 to January 31, 2023 for P60,000. Required
adjusting entry on Dec. 31, 2022: DEBIT CREDIT
Entry made: Cash 60,000
Unearned Rent 60,000
Adjusting entry: Unearned rent 50,000
Rent Revenue 50,000
LA VERDAD CHRISTIAN COLLEGE
Example – Accruals
1. Accrued Interest on loans Supplies – ABC co. borrowed money for
P100,000 on June 1, 2022 with an annual interest of 20% to be due on May
31, 2023. On Dec. 31,2022, the required adjusting is
DEBIT CREDIT
Adjusting entry: Interest Expense 11,666.67
Interest Payable 11,666.67
100,000 x 20% x 7/12 = 11,666.67
2. Accrued revenue - ABC co. received advanced payment for rental of
leased office spaces from August 1, 2022 to January 31, 2023 for
P60,000. Required adjusting entry on Dec. 31, 2022: DEBIT CREDIT
Entry made: Cash 60,000
Unearned Rent 60,000
Adjusting entry: Unearned rent 50,000
Rent Revenue 50,000
LA VERDAD CHRISTIAN COLLEGE
Alternative method of recording deferrals – Prepaid Expense
a.Asset method :
DEBIT CREDIT
Entry made: Prepaid Rent 120,000
Cash 120,000
Adjusting entry: Rent Expense 70,000
Prepaid Rent 70,000
b.Expense Method
DEBIT CREDIT
Entry made: Rent Expense 120,000
Cash 120,000
Adjusting entry: Prepaid Rent 50,000
Rent Expense 50,000
120,000 less 70,000 = 50,000 prepaid rent
LA VERDAD CHRISTIAN COLLEGE
Alternative method of recording deferrals – Unearned Revenue
a.Liability method :
Entry made: Cash 60,000
Unearned Rent 60,000
Adjusting entry: Unearned rent 50,000
Rent Revenue 50,000
b. Income method
Entry made: Cash 60,000
Rent Revenue 60,000
Adjusting entry: Rent Revenue 10,000
Unearned Rent 10,000
P60,000 – 50,000 already earned = P10,000