Simplicity Makes It Easier

In most of the examples and case studies in this book, you will find numbers rounded to the nearest hundreds or thousands of dollars because that makes it easier to understand the concepts. You can do the same with your own numbers. If you are dealing in millions of dollars, round off the numbers you are working with to the nearest thousand. If you are dealing in thousands, round off to the nearest hundred, and so on. Of course, pennies should almost always be disregarded (unless you are dealing with costs per each item, as discussed in the next paragraph). After all, if sales are actually $8,573,425.76, and you round it off to $8,573,000 you have introduced an error of only 0.005 of 1 percent—hardly enough to alter any decisions made based upon the report.

Accountants call this concept materiality. A material error is one which is large enough to cause people to make a decision that is different from a decision they would make if they had the correct figures.