ADVANTAGES OF DOUBLE ENTRY SYSTEM

ADVANTAGES OF DOUBLE ENTRY SYSTEM

• A complete system: Double-entry system is a complete system of book-keeping. It records not only each and every financial transaction, but also each aspect of the transaction.
• A Systematic system: A systematic technique is followed in recording financial transaction in double-entry book-keeping system. It records financial transactions in a systematic and chronological order with suitable narration of the financial transaction.
• A Scientific system: The double-entry book-keeping system is a scientific system of book-keeping. Double-entry system has its own set of principles and rules. Under those principles and rules, two aspects of every financial transaction are recorded.
• Ensures mathematical accuracy: Double-entry book-keeping system is based on the double-entry principle which means ' for every debit amount there is a corresponding credit amount'. Such a method of debit and credit can help ensure arithmetical accuracy of the recordings of financial transactions.
• Detects fraud and errors easily: This system helps bookkeepers easily detect fraud and errors that cause complication and delay of the organization of all the records. Double entry bookkeeping provides precise information of all the significant documents and records, which will prevent a company from losing track of all their proceeds.
• Ascertains accurate profit and loss: Double-entry book-keeping system helps to ascertain the true profit or loss of a business by preparing the profit and loss account for a given period.
• Depicts financial position: Double-entry book-keeping system also helps to reveal information about the financial position of the business by preparing a statement called balance sheet.
• Universally accepted system: This system follows GAAP (Generally Accepted Accounting Principles). So data and information comes from this system are most welcome to all the users of accounting information.
• Controls cost: Double-entry book-keeping system keeps a detailed record of financial transactions. Therefore, the recording of financial transactions in books provides necessary information for the purpose of control costs.
• Helps in decision making: Double-entry book-keeping system communicates financial information that is necessary for taking decisions by a business. Double-entry book-keeping system also provides necessary information to different users such as owners, managers and creditors for their decision making purposes.