Double Entry System- Characteristics Advantages Disadvantages

Need help with your homework? Look no further! Our subject experts are ready to effortlessly handle your assignments, so you can finally say goodbye to stress and hello to top grades.

Please enable JavaScript in your browser to complete this form.
Click or drag files to this area to upload. You can upload up to 3 files.
Get a response in under 15 min

Every business organization has two facets associated with it. What is given out has a taker in itself, and every transaction has a loss and a gain associated with it.

As per the double entry system of bookkeeping, there are two accounts associated with any business organization. Introduced by Italian Lucas Pacioli in 1494, this system was primarily developed in England and has been regularly used in that country.

Understanding the double entry system:

The double entry system specifically involves two accounts such as cash account, which to a great extent would be increased and liability account where those loans that are to be paid would increase.

Basing itself on the concept of, ‘’Somebody’s loss being another person’s game’’, it is imperative that there are double accounts in consideration of credit entry system.

As per the American measuring standards, every business transaction is specifically associated with liability, asset, expenses and revenue in a collective manner or individual manner. In every business transaction either there is an increase or a decrease in total range. Whereas increase in assets and expenses are debited, on the one hand, decrease in assets and expenditure are credited on the other. Other changes in debit and credit work in an according manner.

The point of recording debit and credit system in regards to same amount is the primary aspect of double entry system.

Specific features:

There are certain specific features that are associated with this concept:

  • Double accounts are to be affected:

The most important aspect associated with this system is the presence of dual accounts, the credit, and debit system. Though certain transactions have more than two accounts in specific cases, however, the amount pending both on credit and debit account tends to be similar.

  • There is dual aspect in every transaction:

It is to be noted that every debit has a specific credit associated with it, hence when counting is made it both these accounts are taken into consideration in a simultaneous matter.

  • Account is to be divided into two specific parts:

There are books of original account as journal and subsidiary against which the ledger account is to be placed. The left side is taken as debit while right side can be taken as credit.

  • Segregation of amount column:

This amount column is specifically divided into Debit side and Credit side.

  • Accounting concepts and convention:

To maintain the book of accounts in a correct manner, in most cases, the double entry system is followed.

  1. Preparation of trial balance:

There are two stages of recording in a double entry system. Initially, every business transaction is recorded in a subsidiary book or a journal. It is based on accounting details of these books that ledger accounts are prepared. Details from this ledger accounts are now specifically used for preparing trial balance and which itself tests arithmetical accuracy of accounting that has been made.

  1. Preparation of final accounts:

It is the final accounts that are prepared that helps in determining profit and loss aspects of a particular business organization. Trial balance that is prepared based on balance of ledger accounts has both credit and debit balances associated with it. When equated, it can be found that both these columns have similar end results.

In case of Income statements as Trading, Profit and Loss account as well, there are specific credit and debit sides associated. Such division can be seen in case of Balance sheet as well, and this preparation of data and presentation of that in a categorical manner depicts usage of a specific Double Entry System in case of accounting.

Positives associated with Double Entry System:

There are certain specific advantages that are associated with this system of accounting which ensures that every detail available can be used for further compilation of financial details.

  • Detailed information of the records:

Since business deals are associated with assets, expenses, revenue, capital and liabilities on a greater note, hence with help of this system a detailed note can be maintained, which can also act as a reliable fall-back option in case of any discrepancy.

  • Complete details of profit and loss:

With help of this double entry system, the Trading Account can be formed which is associated with deriving the gross profit and loss amount. Also, with Profit and Loss account that is framed with help of this system, net profit or loss that an organization has incurred can also be seen.

  • Detailed knowledge of assets and liabilities:

The Balance Sheet that is prepared helps in segregating assets and liabilities and keeping track of the company’s financial position.

  • Fraudulence:

Since there is a detailed description of assets and liabilities as well as profit and losses incurred by a company, hence chances of any unaccounted income or expenditure can be immediately brought to notice.

  • Comparative studies:

With the help of a Balance Sheet that is prepared with double-entry system, financial statements can be both compared on an annual basis as well as comparative analysis of actual performance obtained against desired performance.

Problems associated with Double Entry System:

These are certain areas which do not have any solution when this system is being used.

  • Errors of principle:

Since this system is specifically associated with balancing credit and debit side, hence it does not have capacity to check out discrepancies when cash sales account is being debited from cash account.

  • Errors of omission:

The major issue associated with this form of accounting is that, in case of detecting errors, it is important that there be a detailed format. In case of any discrepancy, if the recording is not available in the book, then it is very difficult to find out errors.

  • Compensation of errors:

Since this system is based on equating of credit with debit accounts, it may so happen that when a particular account is credited with a certain amount of money, another account is debited for the same amount. Though, equality of both accounts can be obtained, but this mistake remains.

Basis of Accounting:

When the concept of revenue is to be introduced in regards to Accounting, it is important to understand timing associated with the revenue along with incurred costs.

This can be differentiated as Cash Basis and Accrual Basis.

Defining Accrual Basis:

In case of this system, both cost and revenue are taken into consideration in its period of occurring rather than its period of actual payment. Technically speaking, revenue and cost are generated only at a time when legal right and obligation to make and provide payment is recognized.

Since this format takes into account date of transaction matching of revenue can be done which can also help in determining actual revenue that is earned during this period.

Example: Generally, credit sale for the month of October 2006, is to be recognized only in January 2007, but it will be recorded in the Books of Accounts in the month of October 2006 itself. In case of salary itself, it will be taken into consideration in the month of November 2006 itself.

Defining Cash Basis:

In this case, cost is said to be recognized though actual payment and receiving is done in the form of cash. Since, this mode is applied only when there is doubt regarding actualization of payment that is to be made, so for sales on hire, payment is made on the basis of installment over a limited period. Sales for those parts are to be complete which has received its expected payment. In case of government organizations as well as professionals, account is prepared in this cash basis.

Example: When salary for month of November 2006 is paid on December 2006, date recorded in Book of Accounts would be of December 2006. Also, credit sale rather than being recorded on date of sale would be recorded on date on which payment has been received.

However the major backlog of this system rests in the fact that in this case revenue is matched with cost to get actual profit rate.

A detailed understanding of this Double Entry system is to be understood for better application of its concepts.


Links of Previous Main Topic:-

Links of Next Financial Accounting Topics:-

Homework Blues?

Get expert help with homework for all subjects.

  • NPlagiarism-free work
  • NHonest Pricing
  • NMoney-back guarantee

Latest Reviews

Solved Sample Works

Accounting Homework

Corporate Accounting Sample

Biology Homework

Genetics Assignment Sample

Essay Writing Help

Business Plan Sample

Homework Help FAQs

Our Answers to Your Questions

How do I submit my homework?

Getting homework help is very simple with us. Students can either send us the homework via email or they can upload it to our online form here. For a quicker response, You can also chat with us at WhatsApp and submit homework directly. You are sure to get a response from our side within 10 minutes.

How much will my homework cost?

The cost of paying someone to do your homework varies depending on the service and the type of assignment. We have listed our standard pricing plans for popularly used writing services. For other kind of assignments, You can get a free instant quote from us using our online form.

We also accept partial payment to start working on your assignment help. You can pay the remaining amount when your task gets completed. No pressure of up-front payment. No hidden order costs.

Can I receive help with my homework anytime?

Yes, you can receive help with your homework anytime with us. Our online homework help services are available 24/7, allowing you to receive assistance with your homework anytime, anywhere.

For urgent homework requests, reach out to us through our LiveChat or WhatsApp channels and one of our friendly support agents will assist you in finding the right expert for your online homework help request immediately. With our services, you can rely on 24/7 availability and meeting deadlines.

Are online homework websites budget-friendly for students like me?

Yes, Our Online Homework Help websites are an affordable solution for you as a student. Compared to traditional tutoring services, MyHomeworkHelp prices their homework help services honestly and within the budget of college students. This makes it easier for you to receive assistance with your homework without breaking the bank.

What is your plagiarism-free policy?

At myhomeworkhelp, we take plagiarism very seriously and ensure that all solutions provided by our tutors are original and authentic. Our tutors are trained to provide custom-made solutions, tailored specifically to meet the requirements of each student. We do not provide pre-written papers. All our homeswork solutions are made from scratch, guaranteeing 100% orignal homework answers.

Additionally, we have strict plagiarism-detection tools in place to check all submissions for authenticity.

Is using an Online Homework Help Service cheating?

Using online homework help services is not equivalent to cheating. Our services are intended to support students with their homework and provide them with the resources they need to succeed academically. With the help of our online homework help services, students can receive immediate assistance with their homework from any location, at any time.

At myhomeworkhelp, we are committed to promoting academic integrity. Our tutors provide solutions that serve as guides for drafting your own work. It is not acceptable to submit someone else's work as your own, as this constitutes academic plagiarism.

Can I chat with my tutor?

Using our secure chat board, you can now chat directly with your assigned tutor. The chats are encrypted both ways to secure your privacy. This makes your contact with the tutor directly & confidentially, so you can better explain any requirements or changes if needed or just need updates.

You can't contact the experts outside of chat board platform. Sharing any personal information, including but not limited to contact information, goes against our Terms and Conditions and therefore may result in permanently blocking you from the platform. We take any personal data very seriously and we do it for the safety of our users.

Know more about chat board here.

What is your money-back guarantee policy?

It’s worth noting that our online homework help service rarely leads to disappointment among students. Our expert tutors, along with our support and quality assurance team, are dedicated to providing the best possible experience for our customers. However, if for any reason a student is unsatisfied with their homework help solution, we offer unlimited revisions until they are fully satisfied.

In the rare event that a student remains unsatisfied even after revisions, we offer a money-back guarantee. We want all of our students to feel confident and secure when they turn to us for assistance with their homework, and this guarantee is just one way that we demonstrate our commitment to providing the best possible service. If you have any concerns about our services or the quality of the work you receive, please contact us for support.

What is the expertise of the tutor assigned to do my homework?

At myhomeworkhelp, we take pride in our team of qualified and experienced tutors. All of our tutors undergo a rigorous selection process and are required to have a minimum of a master's degree in their respective fields. Additionally, they must pass a series of tests to demonstrate their proficiency and ability to deliver quality work. We believe in transparency and providing our clients with the best possible service. You can be confident in the expertise of the tutor assigned to do your homework.

What about privacy & confidentiality?

Using My Homework Help is absolutely safe. We care about your security, therefore we encrypt all personal data to make every user feel safe while using our services and we don’t share any personal information with any third parties without your permission. Your credit card information is not stored anywhere at My Homework Help, and use of PayPal relies on their secure payment networks. Your identity, payment and homework are in safe hands. You can always be certain of getting professional help and remaining anonymous, while using My Homework Help.