Advantages And Disadvantages of Double Entry System of Accounting

Advantages / Merit of Double Entry System

There are following Advantages / Benefits And Disadvantages / Drawbacks of using Double Entry System of Bookkeeping.

These are explained below:

1. Double Entry of Accounting System ensures proper maintenance of Books of Accounts. Dual Aspects of Business Transactions are recorded and as a result every Debit Side must be equal to the monetary value of Credit Side. The system insures transparent, clear and reliable information to the Users of Financial Statements.

2. This system of Double Entry of Bookkeeping helps in the accuracy of Business Transactions by equalizing of both Debit And Credit Side in monetary value and hence avoid errors, mistakes and frauds upto a certain level.

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3. Complete information of Accounting Records is available through Financial Statements And Reports, so the management can easily judge the Financial Performance and Financial Position of the business by seeing Net Profit / Net Income / Net Loss obtained from Income Statement / Profit And Loss Account and Balance Sheet respectively.

Disadvantages of Double Entry System of Accounting

Although, this system has many benefits for the Businesses but it has some Drawbacks which are mentioned below:

This system is expensive and time consuming as it required Expensive Accounting Tools to operate the Double Entry Bookkeeping. Eventhough, these Accounting Software make accounting work easy but due to the increasing number of books of accounts, these create complexity and ultimately it causes to burden of loss due to mistakes, errors and frauds.

Double Entry System Conclusion

So, Double Entry Of Bookkeeping System is suitable system for those larger organizations who are running smoothly and want to stabilize their business by maintaining Proper Books of Accounts as this system interprets the business’ accounting information well and provides reliable, accurate and clear Financial Performance and financial Position of Business.