Double entry book-keeping is a scientific and systematic system of recording business transactions of the firm.The following are the main advantages of double-entry book-keeping:
1. Scientific System Based On Fixed Rules And Principles
The double-entry book-keeping system is a scientific system of book-keeping. Double-entry system has its own set of principles and rules. Under those principles and rules, two aspects of every financial transaction are recorded.
2. Systematic System Of Recording Transactions
A systematic technique is followed in recording financial transaction in double-entry book-keeping system. It records financial transactions in a systematic and chronological order with suitable narration of the financial transaction.
1. Scientific System Based On Fixed Rules And Principles
The double-entry book-keeping system is a scientific system of book-keeping. Double-entry system has its own set of principles and rules. Under those principles and rules, two aspects of every financial transaction are recorded.
2. Systematic System Of Recording Transactions
A systematic technique is followed in recording financial transaction in double-entry book-keeping system. It records financial transactions in a systematic and chronological order with suitable narration of the financial transaction.
3. Complete System
Double-entry system is a complete system of book-keeping. It records not only each and every financial transaction, but also each aspect of the transaction.
4. Ensures Accuracy
Double-entry book-keeping system is based on the double-entry principle which means ' for every debit amount there is a corresponding credit amount'. Such a method of debit and credit can help ensure arithmetical accuracy of the recordings of financial transactions.
5. Ascertainment Of Profit Or Loss
Double-entry book-keeping system helps to ascertain the true profit or loss of a business by preparing the profit and loss account for a given period.
6. True Financial Position Of The Business
Double-entry book-keeping system also helps to reveal information about the financial position of the business by preparing a statement called balance sheet.
7. Assists Cost Control
Double-entry book-keeping system keeps a detailed record of financial transactions. Therefore, the recording of financial transactions in books provides necessary information for the purpose of costs control.
8. Helpful In Decision Making
Double-entry book-keeping system communicates financial information that is necessary for taking decisions by a business. Double-entry book-keeping system also provides necessary information to different users such as owners, managers and creditors for their decision making purposes.