Accounting Comprehend Question

• Describe Balance Day Adjustments and their Purpose

  A business must be able to detemine how efficienty it has been operatining in the past and in the future. The life of a business is divided in to arbitrary time periods and a profit figure is determined for that period. however not all transaction fit into this time period , so certain adjustments have to be made to the relevant assets, liabilities, revenues and expenses for the period are recorded to ensue that the financial statements are accurate.
• Provision for Doubtful Debts

  Account used to estimate the present accounts receivable that are unlikely to pay their debts in the next accounting period
• Methods to determine the amount of provision for doubtful debts


  1. Investigate each account receivable to determine which are doubtful

  2. Estimate a certain percentage of debts based on past experience

  3. Age the accounts receivable and consider those outstanding over a certain time as doubtful The 'ageing the accounts receivable' method looks at how long each account has been outstanding (e.g. 30, 60 and 90 days) and if accounts are outstanding over a certain time they are considered doubtful
• The 'ageing the accounts receivable' method looks at how long each account has been outstanding (e.g. 30, 60 and 90 days) and if accounts are outstanding over a certain time they are considered doubtful