Preparing financial statement for manufacturing company could be very time and energy consuming. However, there is one way to make it easier, by using accounting software. How about manually? Of course it will not be easy for some business owners.
Before making the financial statement for manufacture company, the business owner should recognize the nature and type of their businesses. One of the most fundamental characteristics of a manufacturing company is processing the raw material into finished goods or also known as production activities.
The production activity results in the account differences in financial statement between the manufacturing company and trading and service companies.
4 Qualitative Characteristics of Manufacturing Financial Statements:
In general, financial statements is viewed based on the purpose to meet the user’s needs. The financial statements have four qualitative characteristics:
- Understandable – the information conveyed can be understood and the applied terms are adjusted to be easily understood by the user
- Relevant – the information presented in the financial statement may influence the user’s decision, thus the content should be relevant
- Reliability – the compiled information in the financial statement is free of misleading notions and material errors
- Comparable – financial statement will be useful when it is comparable to the previous financial statements
The steps in preparing financial statement for manufacturing company.
The steps in preparing the financial statements must be conducted in sequence and thorough. The information presented in the report will be used as the base of decision making. The steps are:
- Create Trial Balance
A trial balance is a collection of existing balances in each account in the ledger. It is taken when all journals have been posted in each account in the ledger. Since the preparation is made prior the the adjustment, then this balance sheet is known as trial balance prior adjustment. The information presented is used to check the accounts balance in debit and credit in the ledger and as the first step to make adjusting entries and worksheet.
- Make adjustment entries.Some transactions probably have not been recorded and are still not appropriate by the end of the period. Thus the adjustment journal is required to produce the proper report in accordance with the company circumstances.
- Prepare a worksheet.A worksheet is a tool to facilitate the financial statements preparation, starting from the trial balance and adjusted to the data obtained from adjusting entries. Then, the adjusted balance will appear in the adjusted trial balance column and is the balances to be reported in the balance sheet and income statement.
- Compile financial statements consist of profit and loss statement, capital change report and other reports.These reports can be directly arranged on the worksheet, since in the worksheet the reported amount has been separated into balance or profit loss report. Then the form of these reports are changed to result more readable and analyzed balance sheet and income statement.
- Customize and close the accounts.After the accounts in the ledger are adjusted, the next is to make a closing journal to close the nominal accounts to the profit and loss account and transfer the profit and loss to the unearned profit account. Then, the information in the journal is posted to the ledger in accordance with the related accounts.
- Make a Trial Balance after Closure.To check the opening debit and credit accounts balance, made a trial balance after closing the contents of real accounts only,excluding the closed nominal.
