In accounting a worksheet or also known as 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. Major purpose of the worksheet is to incorporate adjustments to the closed accounts in a structured manner following a certain format. Worksheets are prepared in situations where adjustments are in large number and it helps in reducing accounting and arithmetic errors in finalizing accounts.
It is not mandatory document to prepared and as an optional step in the accounting cycle it is on the discretion of management or those preparing financial statements to draw up worksheets before final accounts are prepared. It is important to understand that it is neither a journal nor a ledger of some special kind and therefore does not form part of usual accounting records. In short 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.
Normally accounting worksheet has a list of accounting titles as the first column then 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:
- Trial balance or unadjusted trial balance [2 columns – 1 debit, 1 credit]
- Adjustments [2 columns – 1 debit, 1 credit]
- Adjusted trial balance [2 columns – 1 debit, 1 credit]
- Income Statement or Trading, Profit and Loss account [2 columns – 1 debit, 1 credit]
- Statement of financial position or Balance sheet [2 columns – 1 debit, 1 credit]
In total there are 10 columns other than account titles. Worksheet prepared on this format is also known as 10-columnar worksheet. However, accountants may keep trading account and profit and loss account separate to show gross profit and net profit calculations easily. In such case two additional columns will be added and this will make 12-columnar worksheet. Another variation of worksheet is where adjusted trial balance is not prepared and figures are reported or extended to straight to respective statement and accounts column. This way we might have even less than 10 column worksheet.
Another benefit which you can reckon simply by looking at the format of worksheet is that results of income statement and statement of financial position are not delayed until these two statements are prepared separately in formal steps to complete accounting cycle and users of accounting information (mostly management) can use the information without further delay until financial statements are published.
With the advent of accounting software and spreadsheet solutions like Excel and Lotus notes etc the need for worksheet has decreased as they ensure the accuracy of accounting records right at the time of input of data and making journal entries. Thus, the use of worksheets in accounting to capture adjustments has reduced. However, many accounting software still enable users to prepare worksheets easily and if not they can use spreadsheet software to do so.
Following is a sample accounting worksheet with fictitious accounting data to let you understand how it is prepared and works:
(It might take few seconds to load as this is a live Excel workbook)