Rounding numbers is part of the NUMERACY SKILLS FOR BUSINESS: FREE COURSE and Accounting Trainees and Bookkeepers need to know rounding rules.
Why rounding numbers correctly is important.
In the UK the minimum legal tender is one penny, which is one hundredth of a pound £ – this is express as £0.01. In other words we are working to two decimal places, which is fine for most occasions. However for those Accounting Trainees working in Costing departments they will be required to work to much higher degree of accuracy.
A friend of mine works for a well known frozen food firm that makes fish fingers. One of his tasks is to monitor and control the cost of material going into each fish finger. He has to calculate the individual cost of each bread crumb on each finger and he works to within one ten thousandth £0.0001 of a pound. If his rounding is incorrect then any error is compounded by 10000!
It is very important to learn the rules for rounding numbers and to apply them accurately.
Example of rounding numbers
If we divide £11 by 6, we get £1.8333333. If we are working to the nearest penny i.e. two decimal places we would write it as £1.83 and forget the £0.0033333. But as stated earlier for most financial accounting this rounding is perfectly acceptable – as long as we are aware or the rounding error.
This is a typical example of rounding, where we only look at the parts of the calculation significant for the purposes in hand.
Rule of rounding numbers
If the number or digit to round is 4 or below, round down. If the number or digit to round is 5 or above, round up.
Now try the following questions by rounding the following numbers to two decimal places:
If you got all seven questions on rounding numbers correct,then well done and move onto next lesson.