Question

How double entry bookkeeping differs from earlier bookkeeping methods? (No copy paste please/300-400 words/also quote references)

Answer 1

DIFFRENCE BETWEEN DOUBLE ENTRY SYSTEM OF BOOKKEEPING AND EARLIER METHOD FOLLOWED (SINGLE ENTRY SYSTEM) -

MEANING

Earlier method followed was single entry system. Under this method one transaction, has only one effect. The focus under this method is cash receipts and sach disbursements. This method is usually used by proprietor and partnership form of business.

Double entry system of book keeping is a scientific method, of recording the transactions, developed by lucha pacioli. It is named as double entry sysytem since each transaction has two effcts correspondingly. For eg if B paid $100 on buying stationary for business then under this method two accounts effected will be cash (as it is being paid) and stationary (as this is being bought). This feature of this system provides it accuracy and completeness to the records maintained in any entity.

COMPLEXITY -

Single entry system is very convenient and easy to record the transactions in an enterprise.

Double entry system is however, in comparison to single entry system is complex. It requires correct interpretation of the accounts involved, and then posting the entry thereafter.

IDENTIFICATION OF ERRORS

Under single enrty system, identification of errors is very tough (as it is very difficulty to trace them). Under this incomplete records are maintained and hence, tough to identify the accounting errors.

Under double entry system, the records are maintained in their complete aspect and hence the identification of errors is easy in comparison of single entry syatem.

TYPE OF RECORDING

under single entry system of book keeping, the records are not maintain in partial nature that is the records are incomplete.

Under double enrty system of book keeping, minute analysis of all the transactions is done, and are bifurcated account wise and hence, ensures completeness of records.

ASCERTAINMENT OF FINANCIAL POSITION

Under single entry system of book keeping, ascertainment of financial position is a very tough task.

Under double entry system, the ascertainment of financial position is possible very easily.

lEDERG INVOLVED

under single entry system the ledgers involved are either of personal nature or of cash.

Under double entry system, the ledgers involved are - real, nominal and personal in nature.

ECONOMICAL

single entry system is very economical both in terms of cash and time.

Under double entry system both the efforts and time involved are comparatively higher.

SUITABILITY

Single entry system is suitable for proprietorship and partnership firms.

Double entry system is very suitable for large scale forms of business as it promotes compleness and accuracy to the books of accounts.