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Due to limited computer memory, it is not possible to store numbers with infinite precision. Decisions have to be made about how many decimal places to allow and how to manage rounding to deliver maximum achievable accuracy.
Rounding a number means replacing it with a different number that is approximately equal but shorter and simpler to represent. In Superannuation Fund accounting, were final reports typically show 0 or 2 decimal places, the method used for rounding is critical to ensuring accuracy and a balanced set of accounts.
There are different methods of rounding.
Mclowd has opted to standardise on Bankers Rounding, or Gaussian Rounding, which rounds half values towards the even side. This is the preferred code for accounting applications, as it minimises errors and bias. Using this method:
- if the truncated fraction is greater than half the base, the last remaining digit is increased.
- If it is equal to half the base, the last remaining digit is increased only if that produces an even result. For example:
- 0.5 rounds down to 0
- 1.5 rounds up to 2
- 2.5 rounds down to 2
- Other decimal fractions round as you would expect. 0.4 to 0, 0.6 to 1, 1.4 to 1, 1.6 to 2, etc. Only numbers ending in .5 get special treatment.
Where source data is unlikely to show more than two decimal places, Mclowd maintains consistency with general accounting practice by allowing only 2 digit data entry. However, where increased accuracy is desired, users are able to enter numbers with up to 4 decimal places.
In displayed reports, Mclowd shows two decimal places only, however in some reports users are able to hover over a figure to view four decimal places. This enables users to see where a rounding issue might be due to the system handling sub-cent values differently.