Double Entry System!

Double entry is a fundamental concept underlying current accounting and accounting. Double entry accounting is based on the fact that each financial transaction is equal and counterfeits securities in at least two different accounts. It is used to satisfy the expression Assets= Liabilities + Equity. Here, each entry is saved to maintain the ratio.

A double accounting or accounting system means that each business transaction contains two (or more) accounts. For example, if a company borrows from a bank, the company's cash account will increase and the liability of the account will increase the fee. If a company pays $ 200 for advertising costs, cash accounts will decrease and advertising costs will increase.

The double entry also foresees that the accounting equation (asset = liability + participation) is always balanced. In the example of cost advertising, the accounting equation is balanced because cost leads to a reduction in ownership cost. In this example, the asset is reduced in cash and the capital account of the owner's interested owner is also reduced.

The third aspect of double entry is that the amount included in the ledger account is included as a debit because the debit must be the same as the amount entered for credit.

In a Double entry system, transactions are recorded from the point of view of debit and credit. Since account credit is credited to another account, the sum of all the debit must be exactly the sum of all credits. Dual entry accounting or accounting system makes it easy to set up accurate financial statements from accounting records and detect errors.

Concept of double entry system:

The basic idea of ​​double entry is to record business transactions using debit and credit. Total flow is always equal to total credit. In principle, assets, expenses, lost accounts are displayed on the left side of the brochure based on accounting and accounting. The accounts, stocks, profits and profit accounts are displayed on the right side and the same amount of reserves are displayed on both sides. At least one account's credit must be attached to one or more account's accounts. The balance of both accounts will increase or decrease. Otherwise, the same credits are balanced on both sides by flows on both sides.

Advantage of double entry system

In the modern world a double entry system is recognized as the best accounting tool. The main advantages of a dual input system are as follows.

According to this procedure, both aspects of each transaction are recorded. So you can think about the whole account.

1-Since both aspects of the transaction are recorded, equal credit equivalent amount is required for each debit. Therefore, the total flow must be equal to the total credit. Indeed, it is possible to verify the accounting accuracy of accounting records by defining whether the two are equal, by tests known as test reports.

2-This system allows you to easily accumulate the income statement by collecting all accounts related to income, profit, cost or loss and identifying the results.

3-You can create a balance sheet by assembling all accounts related to assets and liabilities and evaluating the company's financial condition.

4-In this system, errors and distractions are found, and moral pressure is placed on accountants and staff.

5-In this system, important statistics are readily available so that management can make appropriate decisions and effectively manage the business.

6-You can quickly and easily obtain all details about the transaction.

7- You can easily identify the total amount of debt and the total amount to be paid to the lender.

8-The sale, purchase, inventory, revenue, expenses and profit and loss of various years are equivalent and the success or failure of the project is measured. Then there are the steps necessary to ensure success and successful cause of failure and commercial success.

Disadvantage of double entry system:

The double entry system can have the following disadvantages:

1. In this procedure, each transaction is recorded in two phases (journal and report) and two aspects (debit and credit). This leads to an increase in the number and size of books, and complications.

2.This requires time, work and money. Therefore, small concern is impossible to maintain account under this system.

3. Expertise is required to maintain account on this system.

4. Because the system is complex, it increases the probability of errors and errors.

From the above discussion it is clear that the advantages of double capture capability are more than disadvantages of the system. Therefore, it is considered the best system in the modern world.