Keeping incomplete records

Question 1

Disadvantages of keeping incomplete records. (6)

Answer 1

More errors
Can't verify accuracy of bookkeeping
Harder to prepare financial statements
Danger of theft/fraud
Inaccurate info for tax purposes
Poor credit control

Question 2

More errors (disadvantage)

Answer 2

Transactions are not recorded with a debit and credit entry, making it more likely that errors take place

Question 3

Cant verify accuracy of bookkeeping (disadvantage)

Answer 3

No trial balance to show mathematical errors. No control accounts either.

Question 4

Harder to prepare financial statements (disadvantage)

Answer 4

Increase the amount that needs to be paid to accountants to prepare income statements and sofp.

Question 5

Danger of theft/fraud (disadvantage)

Answer 5

Owner less likely to see if cash or inventory have been stolen.

Question 6

Inaccurate info for tax purposes (disadvantage)

Answer 6

Incorrect amounts of tax paid to HMRC

Question 7

Poor credit control (disadvantage)

Answer 7

Inaccurate info in the receivables ledger increases the likelihood of underpayment or non-payment by customers.

Question 8

Reasons for keeping incomplete records? (3)

Answer 8

Lack of knowledge
Cost
Time-consuming

Question 9

Lack of knowledge (Reasons for)

Answer 9

The owner may not know how to maintain double-entry bookkeeping.

Question 10

Cost (Reasons for)

Answer 10

The business may not be able to afford the cost of employing a bookkeeper or of training owner to carry out double-entry bookkeeping

Question 11

Time-consuming (Reasons for)

Answer 11

If owner does bookkeeping = less time to concentrate on other aspects of the business.