In adjusting entries, accounts of real and nominal accounts have shown the actual balance. From the recording of adjustments, the company can develop a tool to assist in the preparation of financial statements. Aids in the form of working papers.
The working paper is a list of recording the trial balance, adjustments, and the classification of ledger accounts as an aid in preparing the financial statements. Shaped strip of paper work, so often called a work sheet. Working paper serves as a tool in preparing the financial statements. Because of its function, the working paper is not the ultimate goal of the accounting records.
Use of papers have shown an overview of the accounting process needs to be done to prepare financial statements. Purposes of working papers include:
a. Facilitate in preparing financial statements.
b. Reduce errors that may occur in the adjustment.
c. Check the correctness of the account records that have been done.
Form of working papers used in the form of accounting includes six columns, eight columns, the columns of ten, and twelve columns. However, the form of working papers used are ten columns.
The preparation of working papers must follow the accounting cycle stages in preparing the financial statements. Step-by-step preparation of working papers of ten columns can be explained as follows:
a. Creating a working paper containing a column of ten columns account number, account name, trial balance, adjustments, profit / loss, and balance.
b. Fill in the trial balance with the balance of the accounts ledger.
c. Fill column with paragraph adjustments adjustments have been made previously.
d. Fill in the adjusted trial balance by combining the balance of the trial balance and adjusting entries. If the balance of the trial balance and adjustments are equally debit or credit, adjusted trial balance columns recorded the sum of the two balances. If different, adjusted trial balance columns filled with the difference of the balances are.
e. Fill in the profit / loss with nominal accounts, namely the revenue and expense accounts.
f. Fill in the balance sheet with real accounts.