Advantages of Double-Entry System of Book-Keeping:
The double-entry system of book-keeping is the only scientific and satisfactory system of book-keeping. It has main advantages. They are:
1. It provides a complete or full record of all business transactions, as it records both the aspects of each and every transaction.
2. As the transactions are recorded in a scientific and systematic manner under this system, this system provides an authentic (i.e., reliable) record of all the transactions of a business.
3. As both the aspects of every transaction are recorded, it is possible to prepare a trial balance (i.e., a list of balances of ledger accounts) and check the arithmetical accuracy of books of accounts.
4. As the arithmetical accuracy of books of accounts can be checked by preparing a trial balance, the opportunities for misappropriation and fraud are reduced to the minimum.
5. As nominal accounts are maintained under this system, it is possible to prepare a profit and loss account and find out the true net profit or net loss for a particular year.
6. As correct information about assets, liabilities and capital are available under this system, it is possible to prepare a balance sheet (i.e., a statement of assets, liabilities and owner's capital) and ascertain the true financial position of the business on any particular date.
7. It facilitates the comparison of purchases, sales, etc., of one year with similar items of the previous years and helps a concern to know it's progress from year to year.
8. When books of accounts are maintained on the double-entry system, it becomes easy for a business concern to satisfy the sales-tax and income-tax authorities about the accuracy of the business transactions.
The double-entry system of book-keeping is the only scientific and satisfactory system of book-keeping. It has main advantages. They are:
1. It provides a complete or full record of all business transactions, as it records both the aspects of each and every transaction.
2. As the transactions are recorded in a scientific and systematic manner under this system, this system provides an authentic (i.e., reliable) record of all the transactions of a business.
3. As both the aspects of every transaction are recorded, it is possible to prepare a trial balance (i.e., a list of balances of ledger accounts) and check the arithmetical accuracy of books of accounts.
4. As the arithmetical accuracy of books of accounts can be checked by preparing a trial balance, the opportunities for misappropriation and fraud are reduced to the minimum.
5. As nominal accounts are maintained under this system, it is possible to prepare a profit and loss account and find out the true net profit or net loss for a particular year.
6. As correct information about assets, liabilities and capital are available under this system, it is possible to prepare a balance sheet (i.e., a statement of assets, liabilities and owner's capital) and ascertain the true financial position of the business on any particular date.
7. It facilitates the comparison of purchases, sales, etc., of one year with similar items of the previous years and helps a concern to know it's progress from year to year.
8. When books of accounts are maintained on the double-entry system, it becomes easy for a business concern to satisfy the sales-tax and income-tax authorities about the accuracy of the business transactions.
No comments:
Post a Comment