Guide to financial statement elaboration
On the last day of the month:
1. Take an inventory of raw materials, goods in process and finished goods.
2. Close the Books
a. Square the Cash Book
To construct the Statement:
1. Pass all the ending debit and credit balances from the Cash Book to the Book of Accounts.
2. Pass the balances from the Amount Sections of Sales and Purchases to the Book of Accounts.
3. Calculate the balances of the accounts in the Book of Accounts like this:
Cash on Hand
4. Compare control account balances (Cash on Hand, Banks, Accounts Receivable and Payable, Loans to Employees) to the balances in the Book of Accounts.
a. They should be equal
5. Pass all balances from the Book of Accounts to the Trial Balance.
a. Use last month's Inventory
1) Review the balance entries checking the numbers carefully.
6. Pass the Balances from the Trial Balance to the Profit and Loss Statement and the General Balance Statement.
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