Incomplete Records

Question 1

State the advantages of keeping double entry records.

Answer 1

1. Easier to check for errors and omissions, easier to validate figures because documents provide proof.
2. Availability to up to date info e.g. trade receivable and trade payable balances
3. Enables systematic analysis of data and allows comparisons over time and/or with other firms which helps in long-term planning

4.Enables the operation of a credit control system

5. Easy to produce final accounts and eventually save on accountancy fees

Question 2

State the disadvantages of keeping double entry records.

Answer 2

Time and cost of setting up and operating the double entry system

Requires accounting knowledge or hire an accounting incurring an additional cost

Question 3

Why do minority balances (on credit) arise in trade receivable control accounts?

Answer 3

1. Goods returned by trade receivables after full payment
2. Over payment by trade receivables

Question 4

Why do minority balances (on debit) arise in trade payable control accounts?

Answer 4

1. Goods returned to trade payables after full payment
2. Over payment to trade payables