8.1 Prepare the Worksheet
Key Takeaways
- HCS412304 PC 1.1 requires the worksheet in the prescribed multi-column format bridging the unadjusted trial balance to financial statement columns
- A common 10-column worksheet pairs debit/credit for Trial Balance, Adjustments, Adjusted Trial Balance, Income Statement, and Balance Sheet
- Every adjustment must appear on both a debit and a credit in the Adjustments columns so the pair still balances
- Income-statement account balances extend to the IS columns; real accounts and drawings extend to the Balance Sheet columns
- Net income or net loss is entered as the balancing figure that equalizes both the IS and BS column totals
Why the Worksheet Matters on Assessment Day
Unit HCS412304 Prepare financial reports opens with Element 1, Performance Criterion 1.1: the worksheet is prepared using the prescribed format. In TESDA Bookkeeping NC III practical projects, assessors rarely accept a pile of loose figures that "happen" to become statements. They expect a structured worksheet that proves you can move from ledger balances → adjustments → adjusted balances → statement columns without losing a peso.
The worksheet is not a formal financial statement under PFRS. It is an internal working paper—a bridge tool. Done correctly, it almost writes the Income Statement and Balance Sheet for you. Done incorrectly, every later report inherits the error. Treat PC 1.1 as the gate: if the worksheet fails, PC 1.2–1.4 usually fail with it.
Assessment framing: On a five-hour work-related project, the worksheet is often the first financial-report artifact you complete after the adjusted trial balance. Neat columns, ruled totals, and double-entry adjustments are scored for accuracy—not for fancy formatting software.
Prescribed Column Structure (Typical 10-Column Worksheet)
Philippine bookkeeping textbooks and TESDA-aligned modules commonly use a 10-column worksheet (five debit/credit pairs). Header information always includes the business name, the words "Worksheet," and the period ending date (for example, "For the Year Ended December 31, 2026").
| Column pair | Debit / Credit | Purpose |
|---|---|---|
| Trial Balance | Dr / Cr | Unadjusted ledger balances transferred from the preliminary or unadjusted TB |
| Adjustments | Dr / Cr | Period-end adjusting entries (accruals, deferrals, depreciation, bad debts, supplies, etc.) |
| Adjusted Trial Balance | Dr / Cr | TB ± adjustments; must still balance |
| Income Statement | Dr / Cr | Temporary accounts: revenues (usually Cr) and expenses / cost of sales (usually Dr) |
| Balance Sheet | Dr / Cr | Real accounts plus drawings / dividends; ending capital is often derived after net income |
Some centers use an 8-column variant (TB, Adjustments, IS, BS) and compute adjusted balances mentally. The safer assessment habit is the full 10-column layout because it forces you to prove the adjusted TB before extending.
Heading and account list discipline
- List accounts in chart-of-accounts order (assets, liabilities, equity, income, expenses)—the same order you used on the trial balance.
- Leave blank lines for new accounts created only by adjustments (for example, Depreciation Expense, Accumulated Depreciation, Interest Payable, Supplies Expense).
- Use peso amounts with consistent decimals or whole pesos as your center’s working papers require; never mix "₱12,500" and "12500" randomly in adjacent columns.
Step-by-Step Preparation Workflow
Step 1 — Transfer the unadjusted trial balance
Copy each account title and its unadjusted debit or credit balance into the Trial Balance columns. Foot both columns. Debit total must equal credit total before you touch adjustments. If they do not, stop—return to HCS412303 skills (transpositions, slides, single-sided postings).
Step 2 — Enter adjustments in pairs
For every adjusting entry, place the debit amount in the Adjustments Debit column of one account and the credit amount in the Adjustments Credit column of another (or the same pair of accounts). Common Philippine MSME adjustments include:
| Adjustment type | Typical debit | Typical credit |
|---|---|---|
| Accrued salaries | Salaries Expense | Salaries Payable |
| Accrued interest income | Interest Receivable | Interest Income |
| Expired prepaid rent (asset method) | Rent Expense | Prepaid Rent |
| Earned portion of unearned fees | Unearned Service Revenue | Service Revenue |
| Supplies used | Supplies Expense | Supplies |
| Depreciation | Depreciation Expense | Accumulated Depreciation |
| Bad debts (allowance) | Bad Debts Expense | Allowance for Doubtful Accounts |
After all adjustments, foot the Adjustments Debit and Credit columns. They must balance.
Step 3 — Compute the adjusted trial balance
For each line: start with the Trial Balance amount, add same-side adjustments, subtract opposite-side adjustments, and place the result in the Adjusted Trial Balance Debit or Credit column. Foot again. Equality here is your last mechanical checkpoint before statement extension.
Step 4 — Extend to Income Statement and Balance Sheet columns
Extension rules (memorize these):
| Account nature | Extend to |
|---|---|
| Revenues / other income | Income Statement Credit |
| Expenses, cost of sales, cost of services | Income Statement Debit |
| Assets (including contra-asset credit balances such as Accumulated Depreciation and Allowance for Doubtful Accounts) | Balance Sheet (asset Dr; contra Cr) |
| Liabilities | Balance Sheet Credit |
| Capital / Share Capital / Partner Capital | Balance Sheet Credit |
| Drawings / Dividends / Owner Withdrawals | Balance Sheet Debit |
Do not extend Income Summary on the worksheet if you have not used that account yet; many worksheets skip Income Summary entirely and balance with net income.
Step 5 — Balance with net income or net loss
Foot the Income Statement columns. If credits (revenues) exceed debits (expenses), the difference is net income. Enter net income as:
- a debit in the Income Statement columns (to equalize IS Debit = IS Credit), and
- a credit in the Balance Sheet columns (increasing equity).
If expenses exceed revenues, the difference is net loss: credit the IS columns and debit the BS columns.
Then foot the Balance Sheet columns; they must now equal.
PHP Worked Mini-Set (Trading Sole Prop Excerpt)
Assume Luzon Trading, year ended December 31, 2026. Selected lines after adjustments:
| Account | Adj. TB Dr | Adj. TB Cr |
|---|---|---|
| Cash | ₱85,000 | |
| Accounts Receivable | 60,000 | |
| Merchandise Inventory | 120,000 | |
| Store Equipment | 200,000 | |
| Accumulated Depreciation—Store Equipment | ₱40,000 | |
| Accounts Payable | 55,000 | |
| Luzon, Capital | 300,000 | |
| Luzon, Drawings | 30,000 | |
| Sales | 480,000 | |
| Sales Returns and Allowances | 8,000 | |
| Cost of Goods Sold | 280,000 | |
| Salaries Expense | 72,000 | |
| Rent Expense | 36,000 | |
| Depreciation Expense | 20,000 | |
| Totals (illustrative) | … | … |
Income Statement extension (simplified):
| IS Debit | IS Credit | |
|---|---|---|
| Sales Returns and Allowances | 8,000 | |
| Cost of Goods Sold | 280,000 | |
| Salaries Expense | 72,000 | |
| Rent Expense | 36,000 | |
| Depreciation Expense | 20,000 | |
| Sales | 480,000 | |
| Subtotal | 416,000 | 480,000 |
| Net income (plug) | 64,000 | |
| Totals | 480,000 | 480,000 |
Net income of ₱64,000 then appears as a Balance Sheet credit (alongside Capital), while Drawings ₱30,000 remains a Balance Sheet debit. Ending capital that will appear on the Statement of Changes in Equity and Balance Sheet is conceptually ₱300,000 + ₱64,000 − ₱30,000 = ₱334,000—but you still prepare the formal SCE under PC 1.3; the worksheet only supplies the pieces.
Assessment Practical Habits (Philippine Centers)
| Habit | Why assessors care |
|---|---|
| Use a ruler for column totals and double-rule final equals | Signals finished, balanced work |
| Write adjustment letters (a), (b), (c) beside amounts and key them at the foot | Shows each adjustment is a complete double entry |
| Never erase; draw a single line and rewrite if paper rules require | Preserves audit trail on working papers |
| Keep IS and BS extensions mutually exclusive for each account | Prevents double-counting revenue as both income and asset |
| Re-foot every pair of columns before moving on | Catches ₱100 slide errors early |
Common worksheet traps
- Extending Drawings to the Income Statement (wrong—drawings are not an expense under PFRS presentation for owner equity).
- Extending Accumulated Depreciation as a debit asset without placing it as a credit contra in the BS Credit column.
- Forgetting to create new expense/payable lines for accruals, then wondering why Adjustments columns will not balance.
- Computing net income correctly on IS but posting it to the wrong side of the BS pair.
- Using merchandise inventory’s beginning balance on the IS when the problem already gives Cost of Goods Sold on the adjusted TB (follow the accounts you actually have).
How the Worksheet Feeds PC 1.2–1.4
Once the worksheet is complete:
- Income Statement (PC 1.2) — lift revenue and expense figures from the IS columns; arrange them in single-step or multi-step form.
- Statement of Changes in Equity (PC 1.3) — lift beginning capital, net income/loss, drawings/dividends, and additional investments.
- Balance Sheet (PC 1.4) — lift asset, liability, and equity balances from the BS columns, using ending capital that articulates with the SCE.
If your worksheet IS credit revenues and BS debit assets are incomplete, your formal statements will not articulate. PC 1.1 is therefore not optional busywork—it is the control schedule for Element 1.
Closing Checkpoint
Before you leave the worksheet on assessment day, verify five equals signs: Trial Balance Dr=Cr, Adjustments Dr=Cr, Adjusted TB Dr=Cr, Income Statement Dr=Cr (after net income/loss plug), Balance Sheet Dr=Cr (after the same plug). That five-point proof is the practical meaning of "prescribed format" done competently under HCS412304 PC 1.1.
Under HCS412304 Performance Criterion 1.1, what is the worksheet’s primary role in the Bookkeeping NC III cycle?
On a standard 10-column worksheet, where should the owner’s Drawings account balance normally be extended?
After footing the Income Statement columns, revenues exceed expenses by ₱64,000. How is that net income entered to balance the worksheet?
Which condition must be true before you extend adjusted balances into the Income Statement and Balance Sheet columns?