double entry book keeping

Question 1

reasons for double entry book keeping

Answer 1

•Taxes paid/owed depend on it.
•Banks use it to make loan decisions.
•Owners use it to calculate profit/loss.

Question 2

purpose of double entry book keeping

Answer 2

need bookkeeping records to prove what assets it owns, what trading levels it operates at and how profitable it has been.

Question 3

accounting equation

Answer 3

assets=capital +liabilities
both sides need to be balanced

Question 4

advantages of accounting software

Answer 4

•Automated reports for analysis (management insights).
•Reduction of errors (calculations, transposed figures).
•Automated tasks (sales-invoices; payroll; VAT).

Question 5

disadvantages of accounting software

Answer 5

•Setting up and implantation can be complex.
•Lack of staff understanding of what goes on between transactions.
•Costs of software and IT services support packages.

Question 6

what businesses need accounting softwear

Answer 6

needs of each business helps owners decide whether investing in accounting software is worthwhile.

•Sole trader without employees – no payroll needed.
•VAT registered – must use HMRC approved software.
•Number of transactions per month: Less than 10 – manual.