Accounting - Preparing an 8-Column Work Sheet for a Merchandising Business

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The amount recorded in Income Summary is extended to the Balance Sheet Debit or Credit column.

The difference between an asset's account balance and its related contra account is called book value.

Purchases are recorded in the merchandise inventory account.

All accounts are listed on the work sheet regardless of whether there is a balance or not.

Annual straight-line depreciation expense of a plant asset is calculated as the original cost of the plant asset divided by the years of estimated useful life.

Generally accepted accounting principles require that corporations charge 1% of credit sales as an adjustment for uncollectible accounts.

A work sheet should be prepared only once a year.

A net income amount is extended to the Balance Sheet Credit column.