LIMITATIONS OF DOUBLE ENTRY SYSTEMS

DRAWBACKS & LIMITATIONS OF DOUBLE ENTRY SYSTEMS

• Not suitable for a small enterprise: In double entry system a businessman has to keep many books of accounts which are not so easy for a small businessman. A small businessman may make just simple lists of his assets, liabilities, bank balance and debtors and creditors on note book under single entry system.
• Not suitable for a non-commerce background man: This system works under various principles, assumptions and convection. Therefore, accounts cannot be maintained without adequate knowledge and training under this method.
• Rather costly: This system needs to maintain a number of account books. Trained and skilled manpower is also essential for it. Advanced and expensive accounting software also requires a large amount of money. So, simply the system is rather costly.
• Flaw regarding historical cost: This system only keeps records of value of assets according to its historical cost price. But, it does not keep record of transaction according to its market price, which does not give true financial report.

In the view of business and businessman the above points are regarded as the limitations of double entry system. But are they the flues of double entry actually? Several disadvantages of a nice motorcycle may be mentioned as -it's very gigantic for kids, -it's expensive for the poor or -it's difficult to drive for the people who don't know how to run it. But are they really the drawbacks of the motorcycle? Obviously not. If we think of a solvent and systematic business that is running by a qualified body, then all the limitations will be disappeared. So the limitations of double entry system are the tentative issue which depends on business type actually.