What are the Advantages and Disadvantages of the Double Entry System?
By Balaji
Updated on: February 17th, 2023
The advantage and disadvantages of a double entry system are that it aids in cross-checking transactions, but it is also somewhat complex in nature. The double-entry system is an accounting system that records both credit and debit transactions at the same time. It is a scientific method for tracking business transactions, as well as other transactions.
Table of content
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1. Advantages and Disadvantages of Double Entry System
Advantages and Disadvantages of Double Entry System
Every transaction has two sides: one where money is deducted (the debit part) and the other where money is transferred (the credit part). Both credit and debit transactions are recorded by the double-entry system. The advantages and disadvantages of the Double Entry system are discussed in detail below.
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Advantages of Double Entry System |
Disadvantages of the Double Entry System |
|
Helps in cross-checking accounting documents |
Complex in nature |
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Both sides of the transaction are recorded |
Needs to respond to different accounting standards and principles |
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Separate accounts for purchase and payment are maintained |
Not affordable for the small companies |
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Easy identification of fraudulent transactions |
Maintenance costs high |
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Scientific method |
Maintaining accounting books takes time due to double entry |
|
Profit and Loss can be calculated easily |
Needs more manpower |
Every transaction made is recorded here. The chances of making a mistake get minimized after this. No doubt in accuracy as you have maximum transaction information.
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