Patchogue-Medford High School
Accounting I – Chapter 8 Notes
Chapter 8 – The Six-Column Work Sheet Page 198
Objective: Students will be able to demonstrate their knowledge in using a six- column work sheet by preparing it from the information provided in the General Ledger and T/B. They will calculate the Net Income or Net Loss by extending amounts to either the Income statement or Balance Sheet sections of the work sheet.
Previous topics covered from the last chapters in the accounting cycle:
Step 1 – Collect and verify source documents
Step 2 – Analyze each transaction
Step 3 – Journalize each transaction
Step 4 – Posting to the General Ledger
Step 5 – Preparing a Trial Balance
The process covered in this chapter is step 6 in the accounting cycle:
Step 6 – Preparing a six-column work sheet
What is a Six-Column Work Sheet – It is working papers used to collect information from the ledger accounts and put them in one place. The six-columns refer to the amount of columns where the G/L account amounts go. There are two columns (one Dr. & one Cr.) for each type of reporting section: Trial Balance, then Income Statement, and finally the Balance Sheet. The order of presentation is first put all of the amounts in the T/B, next extend the amounts to either the I/S or B/S. Now you can calculate the net income.
The Work Sheet has 6 parts in order: (pg. 209)
- Heading (who, what, when)
- Account number (listed in numeric order)
- Account name (listed by category)
- Trial Balance (with Dr. & Cr. Columns)
- Income Statement (with Dr. & Cr. Columns)
- Balance Sheet (with Dr. & Cr. Columns)
Trial Balance from the G/L – This is a listing of ALL of the accounts with their amounts in either the Dr. or Cr. Columns. The totals of the Dr. & Cr. columns must agree. Always double line and rule your totals. (pg 202).
Do problem 8-1, Enter Balances on W/S, pg 203, WB 148
Each number from the T/B will be extended only ONE time to either the I/S or B/S.
Extending – Is the process of copying amounts from the T/B to the I/S (Temporary accounts, income & revenue) or B/S (Permanent accounts, assets, liabilities, & equity).
First extend to Balance Sheet – (if cash is a Dr. on T/B, then it goes into the Dr. on the B/S)
Next extend to Income Statement- (if rev is a Cr. on T/B, then it goes as a Cr. on the I/S)
Remember that the Matching Concept is always in play when recording transactions and reporting information on the work sheet. Revenues and expenses that relate to each other are recorded in the same accounting period.
The last piece of the work sheet is to calculate Net Income/Loss. (page 206 & 207)
- First add down the Dr. & Cr. columns of the I/S & B/S. None of the four columns should agree at this point.
- Next subtract the two columns of the I/S. If the credit column (revenue) is larger than the dr. column you will have N/I. The difference between the two columns would now go under the column with the LOWER total, in this case the dr. or expense column. For a net loss it would go under the cr. or revenue column.
- You would now put a line under that difference, add the two columns down and put a double line underneath both amounts. The amounts of the dr. & cr. columns will be the same.
- The difference between the I/S columns and the B/S columns will always be the same. Using Dr. & Cr. Rules; if you put the difference of the I/S columns in the Dr. column, then you must put that same amount into the CREDIT column of the B/S. You would check your work by subtracting the two B/S column totals. If it were a net loss the amount would go under the debit column.
- Finally you would single line under the N/I amount, add both columns down and put a double line under the matching totals.
- The four final amounts will be on the same line of the work sheet.
Single lines in accounting mean that the next number underneath this line is a mathematical equation.
Double lines in accounting mean that the number above is final and the report is done.
Do problem 8-3, Extending amounts across the W/S, page 210, WB pg 148.
Terms Page 212
Questions Page 213
Prob. 8-4 Preparing a six-column w/s TB pg 215 WB pg 149
Prob. 8-5 Preparing a six-column w/s TB pg 215 WB pg 150 PC 155 Q 157
Prob. 8-6 Preparing a six-column w/s TB pg 216 WB pg 151 PC 155 Q 158
Prob. 8-7 Preparing a six-column w/s TB pg 217 WB pg 152 PC 156
Prob. 8-8 Fill in missing amounts on w/s TB pg 217 WB pg 153