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Introduction to bookkeeping and accounting
Introduction to bookkeeping and accounting

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1.3 Rounding

For most business and commercial purposes the degree of precision necessary when calculating is quite limited. While engineering can require accuracy to thousandths of a centimetre, for most other purposes tenths will do. When dealing with cash, the minimum legal tender in the UK is one penny, or £00.01, so unless there is a very special reason for doing otherwise, it is sufficient to calculate pounds to the second decimal place only.

However, if we use the calculator to divide £10 by 3, we obtain £3.3333333. Because it is usually only the first two decimal places we are concerned about, we forget the rest and write the result to the nearest penny of £3.33.

This is a typical example of rounding, where we only look at the parts of the calculation significant for the purposes in hand.

Consider the following examples of rounding to two decimal places:

  • 1.344 rounds to 1.34
  • 2.546 rounds to 2.55
  • 3.208 rounds to 3.21
  • 4.722 rounds to 4.72
  • 5.5555 rounds to 5.56
  • 6.9966 rounds to 7.00
  • 7.7754 rounds to 7.78

Rule of rounding

If the digit to round is below 5, round down. If the digit to round is 5 or above, round up.

Activity 4

Round the following numbers to two decimal places:

Part (a)

(a) 0.5678

Answer

(a) 0.57

Part (b)

(b) 3.9953

Answer

(b) 4.00

Part (c)

(c) 107.356427

Answer

(c) 107.36

Activity 5

Round the same numbers as above to three decimal places:

Part (a)

(a) 0.5678

Answer

(a) 0.568

Part (b)

(b) 3.9953

Answer

(b) 3.995

Part (c)

(c) 107.356427

Answer

(c) 107.356