Unit 5 P1 + P2

Unit 5
Business Accounting

P1 Why is it important to keep accurate financial records?
It is important to keep accurate financial records because it helps to keep the business running smoothly. If they do not keep accurate financial records then they might forget to pay bills or forget to chase after payments they have not receive on time. With accurate financial records you can see how well a business is doing.It’s also important that your investors, clients etc. can see how well your business is doing. The investors for example have then an insight of where all the money they invest goes. And if they see that your company isn’t doing well or is almost bankrupt, then they will probably won’t want to invest in your company again. Keeping accurate financial records is also important for legal obligations such as tax. If the business doesn’t have the accurate financial records then the business could get in trouble with the HMRC. It’s also important because if the business wants to loan money then the bank can see how well the business is doing and the financial records will show why they would want to loan the money.
How will this records help the entrepreneur setting up and running the business?This records will help the entrepreneur because he will have a clear view on his profit and loss account. He can see then the amount of money he spent and still has. If the entrepreneur has clear sight of this, he can make his financial decisions better and clearer.
Why is it important to monitor business activity? It is important to monitor business activity because it helps the business to make future decisions. By monitoring its activities their investors for instants, also know where their money is going. Business will update their records on a regular basis. It gives a clear sight of how the business is doing in terms of sales, receiving payments, paying expenses etc. It helps the business to keep an eye on the bank balance to make sure that they have enough...