Here in this article we will discuss about the advantages of Double Entry System is modern and scientific system. It has numerous merits.
Advantages of Double Entry System
Complete Records of Each Transactions
It keeps the personal accounts relating to debtors and creditors as well as impersonal accounts relating to goods, profits, losses etc.. Thus, all the information regarding purchases, sales, expenses, income, profit, losses, debtors, creditors etc… are available in this system.
Checking of Arithmetical Accuracy
Under this book-keeping system, there is every debit amount for a credit amount, as a result, the total of all debits and all credits is equal. It can be tested by preparing trial balance from the ledger balances. If the debit and credit totals of trial balance disagree, it is known that there is error in recording.
Result of Business
Since it keeps a complete records of business transaction, it is possible to determine the net profit earned or net loss suffered by the business during a given period of time by preparing a complete profit and loss account and income and expenditure account during.
Knowledge of Financial Position
It helps to know about the capital, liabilities and assets of a firm with the help of balance sheet prepared immediately after trading and profit and loss accounts. Moreover, it also helps to ascertain how much is to be taken from how many customers or debtors and how much is to be paid to how many creditors.