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Why do we keep accounting records?

To see whether the business has made a profit.

1

How do we assess whether a business is profitable?

Produce an income statement.

2

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

By producing a statement of financial position.

3

How are stakeholders informed about the progress of the business?

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

4

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

Cash budget
Projected income statement
Projected statement of financial position

5

How do owners know when to take corrective action?

By comparing accounting records with what was forecast.

6

Businesses have to maintain accurate accounting records. Why?

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