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Why do we keep accounting records?

To see whether the business has made a profit.


How do we assess whether a business is profitable?

Produce an income statement.


How does a business know if it's solvent or not?

By producing a statement of financial position.


How are stakeholders informed about the progress of the business?

By looking at the businesses income statements and statements of financial position.


What can the owner produce in order to anticipate the future of the business?

Cash budget
Projected income statement
Projected statement of financial position


How do owners know when to take corrective action?

By comparing accounting records with what was forecast.


Businesses have to maintain accurate accounting records. Why?

So that HM Revenue and Customs can collect the correct taxes.