Why is ‘double-entry’ accounting important to follow? Think about what you have learned so far in this unit.

Double-entry accounting is important to follow for several reasons:

1. Accuracy: Double-entry accounting helps to minimize errors. Each transaction is recorded in two accounts, which allows for easy cross-checking. If the total debits do not equal the total credits, then an error has been made.

2. Complete Information: This system provides a complete picture of the company's financial situation. It records not only the cash transactions but also the company's obligations and resources.

3. Financial Analysis: Double-entry accounting makes it easier to analyze financial statements. It allows for the calculation of profit and loss, as well as the tracking of assets and liabilities.

4. Legal Requirement: In many jurisdictions, businesses are legally required to use double-entry accounting. This is to ensure transparency and accuracy in financial reporting.

5. Prevention of Fraud: The system of double-entry accounting can help to prevent fraud. Since each transaction must be recorded twice, it is more difficult for fraudulent transactions to go unnoticed.

In conclusion, double-entry accounting is a crucial part of financial accounting that helps ensure accuracy, provides complete information, aids in financial analysis, meets legal requirements, and helps prevent fraud.