The double entry system is the system which is used in the business world of Modern Times, since it enables traders to obtain the maximum information as to his business affairs from his book keeping records. This system is based upon the fact that each business transaction affects two accounts, one account is that which is receives a benefit in the form of cash, goods or services, and the other account shows the corresponding loss or benefit by it.
Origin of Double Entry System:
Till the year 1544 only one entry system was in Vogue throughout the world. In the year 1544, an Italian merchant Lucas Pacioli published his Book title “De computes Scripturets" on double entry Book-keeping system for the first time. In this book he exhorted the principles of adaptation of a single business transaction in two sides at one and the same time in the book, one of the receiving account and the other of the giving account. In this book he had scrutinized his tests about 400 years back of simple entry book keeping.
Advantages of double entry system of Book-Keeping:
The advantages of double entry system can prove that it is systematic and scientific system has been used extensively in all the countries
Advantages of double entry Book-keeping System are as follows:
Under the system both the aspects are recorded in the books of accounts. It establishes accuracy in accounting work. Trial balance can be prepared in order to check the arithmetical accuracy of the books of accounts.
2) Business Result:
This system ensure arithmetical accuracy. Information regarding expenses, losses, income, gains, assets, liabilities, debtors, creditors etc. is readily available. It helps to ascertain profit earned or loss suffered during an accounting period.
3) Complete Record:
It provides complete record of business transaction double entry system being scientific, records both the aspects of each transaction hence it provides complete record.
4) Comparative study:
The receiving and giving book accounts Run parallel and are kept intact. The receiving account is said to be debited and the giving account said to be credited. The total difference between the two easily brings to complete the annual balance sheet and profit and loss account.Result of current years can be compared with those of previous years. It facilities planning for future.
5 Common acceptances:
Business records prepared under the system are trusted by Financial Institutions, Government authorities and others.
6) Maximum information:
double entry system enables a businessman or professional to obtain the maximum information regarding his business affairs from the book keeping records of this System.
(See also..... Object, importance and utility of Book-Keeping.)