Meaning of Double entry bookkeeping system
The double entry bookkeeping system is a modern, complete and scientific system of accounting. It records the dual effect of each transaction. Firstly, Luca Pacioli originated this system in 1494. In this system, debit and credit aspects are used and must have equal to debit and credit amount. The set of records on this duality is called double entry system.
Features of double entry bookkeeping system
a. Two-fold effect: In this system, transactions are recorded on a two-fold effect, and one account is debited and another account is credited.
b. Equal effect: In this system debit and credit amount must have an equal monetary value.
c. Change in ownership: In this system, the transfer of ownership from one person to another is used. i.e., the sale of goods for cash will change the ownership of goods and cash.
d. Arithmetic accuracy: In this system preparing the trial balance can check the arithmetic accuracy of recording.
More Class 11 notes
Importance or advantages of double entry bookkeeping system
- It keeps complete records of all kinds of financial transactions.
- It provides a check on arithmetic accuracy.
- It helps to find out the profit and loss of a business during a certain period.
- It provides the information to the manager, owner as well as tax authorities.
- It helps to minimize errors and frauds.