A multiple column sheet wherein all necessary information used for preparation of financial statement is recorded in a systematic process is called a worksheet.
Weygandt, Kieso, Kimmel say,
A worksheet is a multiple column form that may be used in the adjustment process and in preparing financial statement.
The very name worksheet indicates that it is a working tool.
Worksheet is a multi-column sheet or a computer spread sheet where accountant writes, in brief, information necessary for preparation of adjusting entries and financial statements.
In this context Roger H. Hermanson, James Don Rewards say,
The worksheet is a columnar sheet of paper or a computer spread sheet on which accountants summarize information needed to make the adjusting and closing entries and to prepare the financial statements.
Bangs and Henselman say,
Worksheet is an important book-keeping and accounting device for performing and providing adjusting and closing processes outside of the actual books themselves, making in this manner for quick and more accurate results, it furnishes also bird’s eye view of the closing process.
In small business organizations where the number of accounts is comparatively less, worksheet is not needed. Worksheet is indispensable for those big business organizations where the volume of accounts is large.
In bigger organizations where the volume of accounts and adjustments are much more, the possibility of error remains at the time of adjustment of adjusting entries with ledger accounts if work sheet is not prepared.
The preparation of financial statements correctly becomes complicated and sometime is delayed. In the present day world it has become the practice of preparing worksheet in the big organizations before preparation of financial statements.
The accountants make adjustments of adjusting entries with other relevant ledger accounts before preparation of financial statements.
Before preparation of financial statements the accountants want to be sure of arithmetical accuracy of accounts by making adjustments of adjusting entries with ledger accounts through work sheet and then go for preparation of financial statements.
Worksheet is prepared at the end of accounting period before preparation of financial statements.
Generally a worksheet contains five steps. In every step there are two money columns- totaling ten columns. That is why sometimes it is asked to prepare a ten column worksheet. The worksheet of a joint-stock company contains more steps.
The step- retained earnings statement is shown in the worksheet just after income statement. Balance sheet is shown after retained earnings statement.
Objects of worksheet
Objects of worksheet are stated below;
- Worksheet ensures the application of pre-closing trial balance before the end of accounting period.
- Worksheet identifies the matters which are to be adjusted before preparation of final financial statements.
- Interim financial reports can be prepared with the help of worksheet.
- Worksheet proves the arithmetical accuracy of the ledger accounts. If all steps of worksheet agree, accountants prepare financial statements on the basis of it and can prepare adjusting and closing journal entries properly.
- Although worksheet is a draft statement results and financial affairs for a particular period of a concern can be known before preparation of financial statements.
Types of worksheet
In the light of object worksheet may be of three types:
- General worksheet: General worksheet contains four to six pair columns. Generally five pair columns or ten columns worksheet can serve the purpose of general business.These five pair columns are
(i) Trial balance,
(iii) Adjusted trial balance,
(iv) Income statement, and
(v) Balance sheet.Such worksheet is used for making necessary adjustment of items before preparation of financial statements of general business concern.
- Detailed worksheet: Such worksheets are prepared for containing more detailed information over general worksheet. Sometimes extra sheet containing columns are enclosed for explaining particular items of general worksheet.The matters for which item-wise lists are to be prepared are:(i) Accounts receivable and accounts payable lists,
(ii) Production expenditure lists,
(iii) Insurance premium lists etc.
- Audit worksheet: This type of worksheet is similar to general and detailed worksheets. This worksheet is used for preparing financial statements and lists for various uses of business concerns.Audit worksheet is prepared in the light of auditing of various items included in worksheet.Of course,
As worksheets are prepared in the light of nature and functions of various business organizations, these may differ from organization to organization. Audit worksheet is an aid to audit work of a business concern.
The above mentioned worksheets are prepared by the accountants for discharging their accounting responsibilities properly.
It may be mentioned that worksheet is not such an informative statement or financial report as can be placed before the management.
Worksheet is a multiple column draft sheet of accounts. It is not a regular ledger account of a business concern. Results determined through worksheet are neither considered as final results nor placed before the management of a business organization.
Worksheet is a technique of accounting through which the accounting information is integrated for adjustment and classification.
The main objective of worksheet is to verify the accuracy of accounting information before preparation of financial statements.
It contains many columns, 8-column, 10-column or 12-column. Normally the columns of worksheet are filled in with wooden pencil so that these can be erased if error is detected. That is why it is termed as scratch sheet.