Incomplete Records

Question 1

Give 4 drawbacks of incomplete records

Answer 1

• Cost of accountants time
• Lack of up to date management information
• Statements sent to trade receivables may be inaccurate
• Dangers of loss or theft of cash or inventory
• Lack of accuracy
• Additional costs incurred
• Reliability of the figures may be questioned
• Lack of independent verification
• Items may be missed from the final accounts

Question 2

Give 2 measures to prevent cash losses

Answer 2

• bank on a daily basis or put in a safe
• invest in security e.g. cameras
• try to avoid using cash, use bank transfers
• so bank reconciliations on a regular basis

Question 3

Give two ways you can prevent inventory losses

Answer 3

• security (CCTV, locks)
• reduce amount of stock held

Question 4

Give 2 benefits of maintaining accounting records using single entry records

Answer 4

• easy to understand and implement = ideal for small businesses
• less time consuming
• lower cost bc it doesn’t require complex accounting software
• flexible for small businesses

Question 5

Give 2 limitations of maintaining accounting records using single entry records

Answer 5

• errors can go unnoticed = inaccurate financial records
• difficult to detect fraud without full record of transactions
• not suitable for complex businesses

Question 6

Give 2 benefits of maintaining accounting records using double entry records

Answer 6

• improved accuracy: every transaction is recorded in two accounts which reduces errors
• easier fraud detection
• improved decision making due to detail of financial reports
• supports more complex transactions

Question 7

Give 2 limitations of maintaining accounting records using double entry records

Answer 7

• recording transactions twice = increases workload = time-consuming
• higher costs (may need specialised accounting software or professional accountants)
• entries recorded incorrectly = fixing errors complicated
• may be unnecessary for small businesses
• requires more training

Question 8

What is mark-up and what is margin

Answer 8

Mark-up:
Cost (100%) + profit (20%) = sales (120%)

Margin
Cost (70%) + profit (30%) = sales (100%)