The Double Entry System Essay Example for Free

The Double origination System essayAccording to the double entry accounting system, a disdain action affects at least deuce accounts and the debit and credit amounts save for the affected accounts must be balanced. These exertions will be recorded in the appropriate books of accounts. Business entities develop a chart of accounts, a list of account titles with their comparable account codes that the business will use in recording and posting in the books of accounts and in coverage in the financial statements.Double Entry System was invented for the first time by Lucas Pacioli of Italy in the division 1494 in Venice but it was developed in England. This system is based on the truth that every business work involves cardinal .parties (1) Receiver and (2) Giver.There can not be any business transaction by only one companionship. If one part is giver of any thing, there must be one more party-receiver. If one part is seller there must be the other party purchases. Receiv er of the transaction is debtor and the giver is the creditor. Thus the transactions take place between two parties, according to Double Entry System every transaction is recorded twice. One party is the debtor and the other party is giver. Receiver is the debtor and giver is the creditor.Accuracy of accounts. The greatest advantage of Double Entry System is that arithmetical accuracy of accounts can be checked easily. Since every transaction is recorded twice, a Trial residuum can be prepared and it can be known whether each transaction has been correctly recorded twice or not. By applying. Double Entry Principle every transaction is recorded twice.Trial Balance can easily be prepared and with the help of Trial Balance Trading and Profit and Loss can be easily prepared to ascertain the gross turn a profit or gross loss or net profit or net loss of the business. cognition of Financial Position. Financial position of the business can be known easily. By preparing Balance pall one can know what assets are possessed by the business and what liabilities are due by the business.Chances of fraud meager. By applying Double Entry Principles chances of committing fraud is very much minimized. If fraud is committed, it can be easilychecked by verification and auditing of accounts. Comparison of Expenses Comparison of expenses of the current year with the previous can easily be made.The system of double-entry bookkeeping does have the capability of making a positive contribution towards economic growth. Although the ability of double-entry to fall apart the success or failure of a business enterprise for a specific period of spread out was not valued by the early merchants, double-entrys capacity to accumulate data on individual execute activities, combined with its ability to bring order to the affairs and accounts of these merchants, rationalized the economic activities of the early English merchants