Double Entry System Advantages & Disadvantages: Any company deal includes at least 2 accounts which we call as Debit and credit. As stated above, double entry system presumes every transaction has 2 elements Debit and credit. Both of these aspects must be recorded in books if accounts. It is thought about as a clinical system of accounting.
It is called so since it records the both elements of a deal. For instance when we purchase some thing for company we need to record both the elements included like the important things we purchased and the thing we paid or offered for that. Without applying the double entry concept, accounting records would only reflect a partial view of business’s affairs.
- Sub Fields of Accounting
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Double Entry System Advantages & Disadvantages
Double entry system is based on the principal that for every single Debit entry, there will always be an equal Credit entry. This is called the Duality Principal.
Benefits of Double entry system:
( 1) Precision:
More precision can be attained by following double entry system in Accounting as it has actually been proved to be a systematic approach of taping monetary transactions.
( 2) Easy to spot mistakes and omissions:
In double entry system if we devote any errors or omissions in preparation of financial declarations it is very simple to identify them as this system is based upon recording both the aspects of a deal.
( 3) Consistency:
Results of one period can be compared with the corresponding period as this system makes it possible for Consistency in preparation of accounts.
( 4) Assists in choice making:
Double entry system guarantees that all the relevant financial data is taped in books of accounts. When ever we require any customised report then we can create from these data which helps is choice making.
( 5) Suggests financial position:
Double entry-system products needed details for illustrating the financial position of the entity. As it assists in to prepare declaration of financial performance and monetary position, it’s extremely simple to understand the financial position as on a specific date.
( 6) Internationally accepted:
This system is based on Normally Accepted Accounting Concepts. It is a globally Accepted system.
Drawbacks of Double entry system:
( 1) Very difficult to comprehend when compared to single entry system.
( 2) Time consuming.
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