Week 4 E Reflections

Hi,

Having missed the first half hour of the class was a definite disadvantage.  In class I did not have a clear understanding of what ‘balance day adjustments’ were and where they fitted in, I had a clearer idea after reading up at home. I was slow to complete the test but felt it was a good exercise for seeing where I am at in the course. I definitely need more practise creating a balance sheet and income statement from a narrative.   I have done the self assessment 4.1 and will ask Nand to check I have used the correct process and have a clear understanding.

Below are descriptions of 3 of several accounting conventions that affect the way the balance is prepared.

Historical cost – that the cost of an asset is at time of purchase e.g. vehicle, this must be depreciated over a period of time of the estimated life.

Conservatism/prudence – Cautious assessment of assets and liabilities to prevent them being overstated or under stated otherwise an inaccurate of the business financial position may occur.

Accounting period – due to business entities operating over a long period an ‘artificial’ time period is created to, 12 months is the usual time period used.

Balance day adjustments are used in accrual accounting to ensure the financial statements show a correct picture of the business financial performance and position. The transactions are adjusted to show income earned in the period match the costs for the same period.

Thanks
Christine

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