what is double entry system in accounting

The two-entry system refers to a system in which two parties are affected by each transaction.

Before understanding the double accounting system, we should understand accounting. The dual accounting system is a method of accounting. Accounting means accounting of various transactions the two-entry taking place in business in principle according to accounting standards. In order to know the exact position of the business. Presently business transactions have become very high. Therefore accounting has become more important.

GOLDEN RULES OF ACCOUNTING

There are hundreds of transactions in business. Remembering is a complicated task. That's why in ancient times there was a saying very popular "Write first, give back, if you forget then take it from the paper" Along with the development of business, the development of the ledger also Double Accounting System is a system in which every transaction of business has an effect on two parties, one side is David and the other side is credit. Keeping both sides in mind. Use of Accounting In this article, we have come to know about the Golden Rule of Accounting, which is very important for accounting.

 

While using the Golden Rule, it is very important to have knowledge of one concept of accounting. Without which you will often be confused, that concept of separate existence which means business is separate and businessman is different, you become account of business. Therefore, whenever you want to see the rule, then look at it from the point of view of business.

GOLDEN RULES OF ACCOUNTING

Example -

   1 Goods purchased This transaction is to be written in the form of a journal.

     So we understand two sides. Goods are coming in business and cash is going out.

                (Goods) Purchase Account (David)

                         from cash account(credit)

In this way the double accounting system will affect the two parties.

The machine is coming in business, so it will be a dr and Mohan is going to give, so it will be a cr.

  machine account dr

      from mohan account

History of Dual Accounting System

father of double accounting system

Journal and Ledger words

It was first used by Lucas Pacioli, a resident of Italy, in his mathematics book "De compuliset seriputiries" in 1914. It was translated into English in London in 1943. Gradually, this system became popular in most countries all over the world. .

dual system feature

1 Affecting Two Sides - In a dual accounting system, every transaction in business has two sides. One side is David and the other side is credit

2 Equal amount on both sides - While writing in the journal, both the parties (David and Credit) are written an equal amount.

3 Complete scientific system- Double accounting system is considered to be complete scientific. A definite objective can be achieved by following the right rules.

4 Arithmetic Correctness Check- By using this method mathematical errors can be reduced

 5 definite purposes- The purpose of double accounting is fixed, they are created and accounting of accounts according to the rules.

6 Opposite Party Accounting- In this system, if one side is David then the other is pass credit.

 7 fixed rules - The double accounting system is done according to certain rules. Which is necessary to follow.

  Main principles of double accounting system

There are many transactions in business, which are accounted for according to the rules of double accounting system. In this system, two sides are affected in every transaction. Their opposite is accounted for. Either side will be David and the other pass credit.

Objectives and Benefits of Double Accounting System

1 Finding the Profit Making Power of the Business

2 Actual position information of the business

3Preventing Deceit

4 Fulfilling a legal requirement

5Checking Mathematical Correctness of Accounts

6 Information for future plans

 

  1 Finding the profit making power of the business

    By accounting at a given time, the businessman can find the profit and loss of his business.

  2  find out the actual position of the business -

  How much property is there in the business, how much liability, what is the ability of the business to earn profit. Information about all these double accounting system is helpful.

3 Preventing Fraud

  By keeping the business in a double written system, two accounts are affected while accounting for every transaction, so that no employee is able to cheat.

4 For legal requirement

According to the Companies Act 1956, only accounts done through double accounting system are recognized.

5 Mathematical Accuracy Check  Double Accounting System Mathematical errors can be avoided by accounting from

6 Information for future plans

The businessman knows his financial position by guessing it correctly. Knowing the right profit and loss of business, he can make future plans right.

Demerits or Limitations of Double Accounting System

1 Suitable only for large businesses They are expensive to use. Small scale maintenance costs are high.

2 Specific knowledge required It is difficult to create a ledger without this information.

Due to the complexity of 3 rules, not everyone can understand it.

4 Having a frugal system

5 Difficult to detect errors

6 long process

7 it is difficult to control without knowledge it is difficult to understand so controlling

  1 Suitable for large merchants only

    For small businessmen, it is considered a more expensive system. Only considers suitable for himself from big businessmen.

2 Specific knowledge required.

Specialization is required to use double accounting system. Those who have good knowledge in this subject can use this system only.

3 The complexity of the rules

Special care has to be taken of the rules while using the double system. If there is any kind of mistake, then the result is full of defects. Therefore this system is considered complex.

4 Being a frugal system

 this system is considered to be very expensive, in which a lot of books and accounts have to be kept. Small businessmen do not consider its use appropriate.

5 Difficulty detecting errors

  In double accounting system, accounting is done in great detail. If any account has been left out in the opening book. Or if any theoretical and counter supplementary account has been made then it is difficult to detect this mistake.

6 Long Process

 The double accounting system is an elaborate system. Or the process explains its final result by looking at the large ledger

7 Being hard to control

To do the work of accounting, different accountants have to be appointed. Due to which this system becomes very difficult.

Major Parts of Dual Accounting System

1Journal and subsidiary book Ledger

2 Trial balance

3 final account

4 Analysis and Interpretation

1 Journal and subsidiary book

The accounts of the transactions in business are done in the initial books, which are called journals, small traders keep their entire accounts in these books. Big businessmen keep journal accounts as well as ledgers. Which are made on the basis of journal. In this, purchase book, sales book, purchase return book, sales return book, cash book, bills received book, bills payable book etc. are made.

2 Trial balance 

Trial balance is prepared with the help of ledger for mathematical check. Using double accounting system, the sum of trial balance DR. and CR. equals.

3 Final Accounts 

Final accounts are prepared with the help of trial balance. The businessman wants to know the right financial position of his business. That's why he makes some accounts in his own place in a given time. Including factory account, business account

Profit and Loss Account and Business Balance Sheet are prepared.

4 Analysis and Interpretation

The trader prepares your final accounts after evaluating which you plan the future of your trade.

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