Explain three reasons why an accountant will consider end-of-year adjustments.

a) Explain how the following items are treated in the Profit and Loss Account and Balance Sheet:

b) Provision for doubtful debts;

c) Depreciation on fixed assets;

d) Accrued income;

e) Prepaid expenses.

observation

Many candidates could not explain the reasons why accountant consider end-of-year adjustments.  In b(i) (ii) (iii) and (iv), candidates performers was high.
Some of the reasons expected in “3a” from candidates include:

3 (a)    Reasons for end-of-year adjustment

1. To ensure that the incomes of a particular period relate to that year.
2. To ensure that financial statements are prepared in accordance with accounting concepts and conventions.
3. To ensure that the double entry principle is applied.
4. To provide for depreciation of fixed assets.
5. To ensure proper classification of capital items from revenue items.
6. To ensure that expenses of a particular period relate to that year.
7. To  take into consideration any stock valuation at the end of the year.