What is an Accounting Worksheet?
Definition: An accounting worksheet is a spreadsheet tool used to record all accounting information used in the preparation of financial statements. Accounting worksheets are designed to ensure financial statements prepared by a business are accurate and devoid of any errors.
Public companies must prepare financial statements to show how they performed at the end of each accounting period. Likewise, private companies and businesses also prepare such reports so that owners can see where their businesses stand financially. Accounting worksheets are some of the commonly used tools in the preparation of financial statements.
Designed mainly for internal use, accounting worksheets are rarely used by external users such as investors or creditors. The worksheet is mostly used within the accounting department to calculate and analyze account balances. Accountants use the worksheet to ensure accounting entries are correct before presenting the final financial statement.
Components of an Accounting Worksheet
A typical accounting worksheet comes with five columns:
- Unadjusted Trial Balance
- Adjustments
- Adjusted Trial Balance
- Income Statement
- Balance Sheet
Unadjusted Trial Balance
The unadjusted trial balance column highlights all the assets the company or business owns as well as liabilities, expenses, and revenue accounts for a given accounting period. The column is further divided into credit and debit, which must always balance.
Adjustments
The adjustments column in the accounting worksheet contains all the accounts in a business or a company that requires some sought of adjustment. Likewise, the credit and debit column of the adjustment column must balance.
Adjusted Trial Balance
The Adjusted trial balance of an accounting worksheet is formulated by combining all the entries of the previous two columns; adjustments and unadjusted trial balance. Just as was the case in the other two columns, the credit and debit side of the adjusted trial balance column must balance.
Income statement
The income statement is the fourth column of an accounting worksheet that details all the values concerning expenses and revenues accounts only. In an income statement, should the value of total revenues exceed total expenses, then the business or company is deemed to have generated a net income.
Conversely, should expenses exceed revenues, the difference would amount to a net loss indicated at the bottom of the income statement.
Balance Sheet
The balance sheet is the final column of an accounting worksheet that contains values with respect to assets liabilities and owners/shareholders’ equity. An accurate balance sheet will have the credit and debit column of the balance sheet equal.
Accounting Worksheet Benefits
An accounting worksheet simplifies the process of preparing financial statements for each accounting period. The worksheet has also proved to be effective for preparing the income statement as well as the balance sheet.
Worksheets, in this case, make it easy to transfer accounts into adjusted trial balance. The worksheets can also be used for planning purposes as managers can examine them and see the impact of adjustments on the final financial statement
The accounting worksheet makes it possible for bookkeepers to remember all the items needed in the preparation of financial statements. It also simplifies the process of making adjustments in financial statements.
The accounting worksheet can also act as a reliable tool for ascertaining the financial health of a company before the actual financial statements come out.
Accounting Worksheet Limitations
The fact that humans prepare them, there is always a possibility of accounting worksheets coming out with errors or inaccuracies in the formula.
Summary Example
The primary purpose of an accounting worksheet is to ensure a bookkeeper does not forget entries or to make adjustments when preparing the income statement and the balance sheet. While they are not required, they allow accountants and managers to see account balances and the potential impact of adjustments on the income statement and balance sheet. It is important to note that businesses usually don’t share their accounting worksheets with external audiences.