What are the Advantages and Disadvantages of the Double Entry System?
By BYJU'S Exam Prep
Updated on: November 9th, 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.
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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.
| Advantages of Double Entry System | Disadvantages of the Double Entry System |
| Helps in cross-checking accounting documents | Complex in nature |
| Both sides of the transaction are recorded | Needs to respond to different accounting standards and principles |
| Separate accounts for purchase and payment are maintained | Not affordable for the small companies |
| Easy identification of fraudulent transactions | Maintenance costs high |
| 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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