USA: +1-585-535-1023

UK: +44-208-133-5697

AUS: +61-280-07-5697

DOUBLE ENTRY SYSTEM OF BOOK KEEPING

Double entry system of book keeping refers to particular transactions which are entered in two aspects. It is based on the dual aspect concept. Posting of each transaction in two different accounts on opposite sides for equal value is known as the double entry system of book keeping. [Normally it is the most accurate, complete and scientific method of accounting].

Simply, every debit must have a corresponding credit and vice versa. Most of the trading organisations follow the double entry system of accounting.

Advantages of Double Entry System

(i)                 It provides a complete record of the financial transactions which is maintained.

(ii)               It supplies complete information about the business.

(iii)             It provides a check on the arithmetical accuracy of books of accounts by preparing a trial balance by taking balances of all ledger accounts.

(iv)              It is helpful in ascertaining profit or loss of a particular period by preparing the trading and profit and loss account.

(v)                It helps the businessman to evaluate the progress of his business through meaningful comparison of operating and financial performance over a period of time.

(vi)              It helps in preventing frauds and errors.

(vii)            It helps income tax and sales tax authorities.

(viii)          It is helpful in preparing accurate claim for loss of stock as a result of fire to the insurance company. 

Disadvantages of Double Entry System 

(i)                 This system requires to maintain wider number of books of accounts, which is not convenient to small concerns.

(ii)               There is no guarantee of absolute accuracy of the books of account which are maintained.

(iii)             It requires more clerical labour, so the system is costly.