Chapter 12, Problem 12.12AP

To determine

Worksheet:

A worksheet is an accounting instrument, which is used at the end of an accounting period to assist in a company’s adjusting and closing entries.

The worksheet is very useful during preparation of closing entries, because it shows clear up-to-date balances of all temporary accounts together in one single place. It also provides a list of all accounts and current balances directly prior to the closing process.

Balance sheet:

A summarized statement of assets, liabilities, and owner’s equity is known as balance sheet. This statement helps the organization to identify the financial position of the company for the specific period.

Statement of cash flows:

Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

Adjustments entries are necessary in the following:

Adjusting entries are needed because certain changes occur during the accounting period and it is not realistic to keep up the changes at that point of time. Adjusting entries are planned entries of the accounting cycle; they do not result in errors. They are used to reproduce the actual value of a product or service used at the end of the financial year.

To Compute: Changes in prepaid expenses and accrued expenses should be entered in the reconciling columns of a worksheet.