Page 155 - Accounting Principles (A Business Perspective)

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in stockholders' equity are credits. (Retained earnings would have a debit ending balance only if cumulative losses
and dividends exceed cumulative earnings.) With the inclusion of the ending retained earnings amount, the Balance
Sheet columns balance.

When the Balance Sheet column totals do not agree on the first attempt, work backward through the process
used in preparing the work sheet. Specifically, take the following steps until you discover the error:
MICROTRAIN COMPANY
Income Statement
For the Month Ended 2010 December 31
Revenues:
Service Revenue $13,200
Interest Revenue 600
Total Revenue $13,800
Expenses:
Advertising Expense $ 50
Gas and Oil Expense 680
Salaries Expense 3,780
Utilities Expense 150
Insurance Expense 200
Rent Expense 400
Supplies Expense 500
Depreciation Expense—Trucks 750
Total Expense 6,510
Net Income $ 7,290
Exhibit 21: Income statement
• Re-total the two Balance Sheet columns to see if you made an error in addition. If the column totals do not

agree, check to see if you did not extend a balance sheet item or if you made an incorrect extension from the
Adjusted Trial Balance columns.
• Re-total the Statement of Retained Earnings columns and determine whether you entered the correct
amount of retained earnings in the appropriate Statement of Retained Earnings and Balance Sheet
columns.
• Re-total the Income Statement columns and determine whether you entered the correct amount of net
income or net loss for the period in the appropriate Income Statement and Statement of Retained Earnings

columns.

An accounting perspective:

Uses of technology

Electronic spreadsheets have numerous applications in accounting. An electronic spreadsheet is
simply a large blank page that contains rows and columns on the computer screen. The blocks
created by the intersection of the rows and columns are cells; each cell can hold one or more words,
a number, or the product of a mathematical formula. Spreadsheets are ideal for creating large work
sheets, trial balances, and other schedules, and for performing large volumes of calculations such

Accounting Principles: A Business Perspective 156 A Global Text