What is a 10-Column Worksheet in Accounting?
The 10-column worksheet is the manual version of a spreadsheet. It shows the movement of collected transactions through the unadjusted Trial Balance to the financials.
Accountants have to document a lot of transactions over the financial year. An accounting process starts with a transaction and its invoice.
The transaction then moves through different accounting entries like the general ledger and sales book. It then moves to the trial balance as a consolidated figure. It ultimately shows up in the income statement and balance sheet financial reporting statements.
This process is long and can be confusing for non-accountants. You can divide the accounting process into two stages to simplify the process. The first stage is about recording the transaction in the appropriate account books, known as ledgers.
These ledgers are consolidated into the trial balance (TB). The TB is the basic document through which making the financial statements starts. Once a trial balance is ready, an adjusted TB is made, and financial statements can be made through the trial and adjusted trial balance.
Accountants will tell laypersons that the actual grunt work is in recording all transactions and making sure the TB is accurate. Since statements of financial position are made periodically, the first stage is more thorough. By the time the financial statements are ready, the TB is expected to be error free and accurately following all accounting principles and reporting all transactions.
The process has become easier with technological advances, but many businesses still require a manually prepared trial balance and ledgers to close by the end of an accounting period. This is where the 10 column worksheet plays its role.
A 10-Column Worksheet in Accounting
A 10-column worksheet helps accountants compile their end of period reporting. While it is not mandatory or required by statutory bodies, it is useful for compiling transactions.
It is particularly useful for businesses that haven’t automated their accounting process.
Using the 10-column worksheet is a good step to reduce the time and complications of closing temporary accounts and finalizing the closing figures for the financial statements.
The 10-column worksheet is very effective in calculating end-of-period transaction adjustments. The “adjusting entries” needed at the end of a period are easily consolidated through the worksheet.
As you can see in Figure 1, the worksheet has five column pairs, each pair with a debit and credit column.
10-Column Worksheet Titles:
- Trial Balance
- Adjusted Trial Balance
- Income Statement
- Balance Sheet.
As a business records its daily ledger accounts, it can transfer the figures to the TB column pair in the 10 Column sheet.
Understanding the Trial Balance
The trial balance data for Frank Investment Advisors is shown in Figure 2 above. Note that both columns are the same ($177,000).
Now, if we see the Adjustments columns, you will see a credit of $1,000 against the row labelled Office Supplies. Follow the same row to the Adjusted Trial Balance columns to understand what this means.
The Office Supplies row now shows a debit of $ 4,000 instead of the previous $5,000. This means that Office Supplies worth $4,000 were used. And $1,000 is therefore adjusted through a credit to report the expense accurately.
Similarly, Accumulated Depreciation (Equipment) also shows a credit of $2,800. Under the Adjusted Trial Balance, the Accumulated Depreciation (Equipment) increases from $14,000 to $16,800.
Debits and Credits add up to increase, while credit will reduce a debit balance and a debit will reduce a credit balance.
Moving on to the Income Statement and Balance Sheet columns, you can see that the entire list of accounts on the trial balance is reflected in either of the two column pairs.
Also the income statement distributes account heads in the debit and credit columns on the worksheet, while the actual statement never shows debits and credits.
Another important point is that the income statement columns will usually not be equal. The other column pairs will balance the debit and credit sides.
The income statement columns will only balance if the company is breaking even and the expenses equal the income. The only change between the debit and credit is the total loss or net profit for the period reported on the worksheet.
This would be possible when a business is breaks even. This means that it did not earn or book any losses. The only variation between the two totals, will be the differential from the figure of net profit, or net loss, the company has earned.
In the example you will see that the debit column of the Income Statement shows a balance of $55,800, while the credit balance is $55,100.
This means that the revenue was less than the expenses due to which the company a faced loss for the period reported in the worksheet.
Points to Remember
Both the income statement and balance sheet columns should show what is known as double entries in accounting terms. This simply means that whatever is shown on the debit side should also be shown on the credit side.
The balance sheet on the worksheet will show the dividends paid by the business, although dividends are not reported on the balance sheet.
These are shown because the balance sheet requires updated balances for retained earnings and shareholder capital.
Since these figures require dividend details to be accurate, the 10-column worksheet reports the dividend amounts to reflect the equity position of the business properly.
There are a lot of logic and accounting concepts involved in preparing a 10 column worksheet. The first two columns (of the trial balance) report closing balances from the general ledger.
The second pair of columns report the year-end adjustments. The impact of these adjustments are shown in the third column (the adjusted TB).
The adjusted trial balance serves as the basis for preparing of the income statement and balance sheet. Once the 10 column worksheet is completed, it becomes a matter of just plugging in values to derive the income statement and balance sheet.
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