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ICSE Class 9 Answered

Explain the advantage of double entry system.
Asked by vishalkumargupta880802 | 17 Jan, 2019, 10:36: PM
answered-by-expert Expert Answer
Following are the advantages of Double Entry System: 
  1. Compute Profit and Loss: This system of accounting facilitates computation of profit or loss after considering all the operating incomes and expenses that have been incurred during a particular accounting year.
  2. Determine financial position: The statements prepared on the basis of double entry system provides information about the profitability of the entity and also the financial position on a particular date.
  3. Scientific System: It is a scientific system of recording business transcations as compared all other systems of accounting. 
  4. Complete Record: It is considered as a complete record of transactions as it takes into consideration all the transactions that helps in determining correct profits and losses of the entity.
  5. Arithmetic Accuracy: Since, it records all the quantifiable business transactions it provides an accurate data which is arithmatically correct and which gives a clear picture of the profitability of the entity. 
  6. Identify frauds: When all the records are analysed and summarised by preparing trial balance, some of the errors or frauds get detected which may affect the financial position and profitability of the entity. 
  7. Assist in decision making: With the help of various statements, it becomes very much easy to take appropriate decisions which based on the financial position of the entity.
Answered by Surabhi Gawade | 18 Jan, 2019, 12:04: PM
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