What is the primary purpose of Balance Day Adjustments (BDA)?

The primary purpose of Balance Day Adjustments (BDA) is to provide accurate performance measurement for the accounting period. These adjustments ensure that the financial statements reflect the true financial position and performance of the entity at the end of the accounting period. BDAs include considerations like accrued expenses, prepaid expenses, and revenue earned but not yet received, which help to align the income and expenses with the period in which they are actually incurred or earned, rather than when cash is exchanged.

This practice is crucial as it adheres to the accrual basis of accounting, which mandates that revenue and expenses are recognized when they are earned or incurred, not necessarily when cash changes hands. By implementing these adjustments, businesses can ensure that their income statements and balance sheets provide a more reliable representation of their financial activities and status for the period, enabling better decision-making for stakeholders.