Double Entry Accounting In Accounting

Task 1

Good records are crucial for the creation of current financial statements, like the income statement (profit and loss) and cash-flow projection. Those statements are crucial for creating and up keeping good relations with your financial advisors like bankers and shareholders. They also present a complete picture of total business operations of your business, which will at the end benefit you as well.
Proper records are also very important at tax time. Poor records can make you to underpay or overpay your company taxes. Therefore, good records are essential during an Australian Taxation Office audit, if you are going to answer questions accurately and to the satisfaction of the ATO.
The below list accounts for the type of information your company’s financial records should consist of, to ensure great success:
- The amount of income is your business generating now, and how much income can you possibly expect in the future?
- The amount of cash that is frozen up in receivable accounts (this means not available to your business to prosper nor yourself), and for how long?
- The amount that you owe/ have in payable accounts for Rent? Utilities? Loans? Products or Services?
- The exact number of your expenses, that will include wages, superannuation,

This is the application of double entry accounting concept. Without double entry system, accounting records would have only report partial view of the company 's transactions. Imagine for example if a company have purchased a vehicle during last financial year, but the records will not show if the vehicle was purchased for cash or on credit. It can be also the case that this car machine was bought in exchange of another service or company asset or even a lease agreement by returning previous one. Information’s like this can possibly be gained only from accounting records if double entry system is