The Practice of Accounting rn Recording the Accounting Information - Essay Example

So to separate the performance of one period from the other, closing entries are used. These entries act as stoppages at the end of a particular period.
Reversing Entries
These are the entries that are used when the results of income statements are taken to the balance sheet. For that matter, every debit has to be reversed with the credit one and vice versa.
Post-Closing Trial Balance
Once the closing and reversing entries are recorded, the whole financial statement is accumulated in the balance sheet, thus there is a need to prepare a new closing trial balance that can take into account all the closing balances shown by the balance sheet as an opening balance for the upcoming period (Wood & Sangster, 2008).
Financial Statement Worksheet
It is a ten-column-based sheet in which right from the opening trial balance to the final balance sheet, all items are presented in a single sheet. Broadly there are five columns named as opening trial balance, adjustments, adjusted trial balance, income statement, and finally the balance sheet. Each column has two sub-columns which are named debit and credit.
Income Statement
The fundamental purpose of an Income Statement is to present the financial results or the performance of the reporting entity for a given period. Particularly, this statement reflects whether a company is earning profits or incurring losses (Wood & Sangster, 2008). 
The format of this statement is developed in such a manner that initially total costs of goods sold are deducted from the net sales of the company to show gross profits/losses. After that, operating and other expenditures are deducted from the gross profit/loss figure to arrive at the net profit/loss figure.
Statement of Retained Earnings
This statement reflects the number of net profits/losses since the beginning such that those profits shown in the statement, are retained by the company (Wood & Sangster, 2008). In this statement, the amounts of drawings or dividend payments are also shown as the withdrawing figures.
Balance Sheet
The main objective of the balance sheet is to reflect the financial position of the business at a specific point in time (Wood & Sangster, 2008). Specifically, the balance sheet shows the closing balances at a particular date of all the assets as well as the closing balances of equity and liabilities which finance those assets. Read More