Double Entry System

Double Entry system refers to such accounting system under which every financial transction is recorded into two separate account with equal amount to determine the true profit or loss and financial position of the business. This note provides the introduction, objectives, advantages and disadvantages of double entry system

Summary

Double Entry system refers to such accounting system under which every financial transction is recorded into two separate account with equal amount to determine the true profit or loss and financial position of the business. This note provides the introduction, objectives, advantages and disadvantages of double entry system

Things to Remember

  • Double Entry System is referred to such accounting system under which every financial transaction is recorded into two separate accounts with an equal amount to determine the true profit or loss and financial position of the business.
  • The profit, loss account and balance sheet are prepared to know the profitability and financial position of the business. 
  • Double entry system is more systematic, scientific and complete system of book-keeping.

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Subjective Questions

Q1:

What do you mean by office resources? Explain their importance.


Type: Long Difficulty: Easy

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Answer: <p>Office resources are the inputs which are the means for obtaining outputs. The office resources are manpower, materials, and sources of income means of transportation and means of communication. The office resources are the tools that support to perform all the activities of the organization for achieving its goal.</p> <p>"Office resources refer to all those means including manpower, which support the operation of office procedures," -<strong>S.P. Arora</strong></p> <p>From the above definition, it can be concluded that the office resources are all the facilities available in the office like men, materials and supplies, furniture and equipment, money, means of transportation and means of communication which are utilized to perform all the activities for achieving organizational objectives.</p> <p>Needs and Importance of office resources</p> <ol><li><strong>It helps to perform official activities:</strong> The office resources are necessary to perform all types of manufacturing, administrative, selling and distribution activities of the organization. Qualitative office resources with required quantity help in smooth and efficient functioning of office procedures.</li> <li><strong>It helps to provide better products and services:</strong> The office resources are basic for producing qualitative products and services. The quality of product and services depends on the quality of resources introduced. Better resources provide better results or outputs.</li> <li><strong>It helps to maximize profit:</strong> Efficient human physical resources assist in producing qualitative outputs at the least cost. Standard products and services satisfy needs and want of the customers which help in increasing sales increases the efficiency of the staff.</li> <li><strong>It helps to save time:</strong> Every organization should complete its activities within the specified time period. The cost of the job done depends on the time spent on it. Modern office resources like computer, calculator and photocopy machine helps to perform the official work with a greater speed which saves valuable time of the employee.It helps to increase goodwill. Modern office resources play important role in making the outlook of the office attractive which helps to satisfy employees and other concerned parties create positive impression in the society which helps to increase the goodwill of the organization.</li> <li><strong>It helps to increase goodwill:</strong>Modern office resources play important role in making the outlook of the office attractive which helps to satisfy employees and other concerned parties create positive impression in the society which helps to increase the goodwill of the organization.</li> <li><strong>It helps to minimize </strong><strong>cost:</strong> Proper management and utilization of office resources help to minimize the cost of products and services. Modern office resources assist in producing quality output in a greater quantity which results into a lower cost of production.</li> <li><strong>It helps to increase efficiency:</strong> Modern office machinery and equipment help to perform the assigned work with greater accuracy and reliability. Chances of errors are almost eliminated by using modern office equipment like computer, calculator and photocopy machine. In fact, accuracy helps increasing reliability in official works.It helps to obtain greater</li> <li><strong>It helps to obtain greater </strong><strong>output:</strong> Every organization makes effort to obtain a larger quantity of output with the least amount of resources. Such efforts can be materialized by managing and utilizing right type and amount of office resources. In fact, the right type of office resources helps to obtain a large volume of outputs.</li> </ol>

Q2:

What are office resources?


Type: Very_short Difficulty: Easy

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Answer: <p>Office resources are all the facilities available in the office like men, materials and supplies, furniture and equipment, money, means of transportation and means of communication which are utilized to perform all the activities for achieving organizational objectives.</p>

Q3:

Define office resources.


Type: Short Difficulty: Easy

Show/Hide Answer
Answer: <p>Office resources are the inputs which are the means for obtaining outputs. The office resources are manpower, materials, and sources of income, means of transportation and means of communication. The office resources are the tools that support to perform all the activities of the organization for achieving its goal.</p> <p>According to S.P. Arora, "Office resources refer to all those means including manpower, which support the operation of office procedures."</p> <p>From the above definition, it can be concluded that the office resources are all the facilities available in the office like men, materials and supplies, furniture and equipment, money, means of transportation and means of communication which are utilized to perform all the activities for achieving organizational objectives.</p>

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Double Entry System

Double Entry System

Book-keeping is an act of keeping permanent records of financial transactions of a business in a systematic way. It helps to determine true profit or loss and financial position of a business. Modern organization maintains the record of financial transactions under double entry system. Double Entry system is referred to such accounting system under which every financial transaction is recorded into two separate accounts with an equal amount to determine the true profit or loss and financial position of the business.Double entry system emphasizes that every financial transaction has two aspects. Each transaction is recorded in two separate accounts with an equal amount. It records both aspects of transactions into debit and credit. The profit and loss account and balance sheet are prepared to know the profitability and financial position of the business. Thus, double entry system is more systematic, scientific and complete system of book-keeping. The following are the definitions of double entry system of book-keeping:

"The specific technique which reflects the concept of duality is known as double entry book- keeping." -Lewis and Gillespie

"Double entry system is the system under which each transaction is regarded to have two fold aspects and both the aspects are recorded to obtain a complete record of dealings." -Juneja, Chawla, and Saksena

Objectives:

  1. To maintain the systematic record of financial transactions.
  2. To solve the problems arises on financial matters.
  3. To provide financial information to the management for making financial plans and decisions.
  4. To determine the financial position of a business on a particular date.
  5. To determine the amount of profit or loss of a business during a period of time.

Features:

The following are the main features of double entry system of book keeping:

  1. Double effect:
    The double entry system maintains records showing the double effect of each financial transactions. It makes a record of each financial transaction into two different accounts on two opposite sides.
  2. Equal effect:
    Every financial transaction affects in two different accounts with an equal amount. The debit side, as well as credit side of two different accounts, is affected by an equal amount.
  3. Debit and Credit:
    The double entry system provides two aspects of each transaction with the names 'Debit' and 'Credit'. The one aspect of the transaction is debited and another is credited in the books of accounts.
  4. Scientific:
    The double entry system is a scientific system of book-keeping. It has own rules and principles for recording financial transactions and preparing financial statements.
  5. Complete record:
    The double entry book-keeping system maintains records in all personal and impersonal accounts. Such complete record of financial transactions helps to identify the actual financial position of a business organization.

Advantages:

  1. It helps the record of a financial transaction in a systematic and scientific manner.
  2. It helps to prepare trail balance to check arithmetical accuracy of books of accounts.
  3. It facilitates for making an audit of the books of accounts.
  4. It helps to ascertain the financial position of the business by preparing trading and profit/ loss account and balance sheet.
  5. It provides the financial information to the management for making plans, policies, and decisions.

Disadvantages:

  1. It is an expensive system because a number of books are required to maintain.
  2. It is not suitable for small business having a limited number of transactions.
  3. It consumes more time for recording the financial transactions and preparing different statements.
  4. It requires a trained and qualified person for making the record of the financial transactions.

Differences between Single and Double Entry System

S.N Single Entry System Double Entry System
1 It is not based on the concept of duality. It is based on the concept of duality.
2 It maintain the cash book and personal account of debtors and creditors. It maintains personal, real and nominal accounts.
3 It does not maintain nominal account so it cannot help to ascertain true profit or loss of the business. It can help to ascertain true profit or loss of the business.
4 It cannot help to prepare a trial balance. It can help to prepare a trial balance.
5 It is suitable for small businesses. It is suitable for large businesses.
6 It is not acceptable for tax purpose. It is acceptable for tax purpose.

Lesson

Book Keeping

Subject

Accountancy

Grade

Grade 9

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