When a work sheet is complete, the adjustment columns should have
A) total credits greater than total debits if a net income was earned
B) total debits greater than total credits if a net loss was incurred
C) total debits greater than total credits if a net income was earned
D) total debits equal total credits

Question

Quizplus · Accepted Answer

The adjustment columns in a worksheet are used to record adjusting entries, which are necessary to correctly reflect the financial position and performance of the company. Adjusting entries affect both the income statement and balance sheet accounts, but they do not affect cash or any other asset or liability that has not yet been recognized. Therefore, the purpose of the adjustment columns is to show how the accounts have been adjusted, not to indicate whether the company has earned a net income or a net loss. The total debits and credits in the adjustment columns should always be equal, which means that the accounts have been correctly adjusted and the worksheet is ready to be used for preparing the financial statements.

When a Work Sheet Is Complete, the Adjustment Columns Should