Double Entry Bookkeeping

Double entry bookkeeping is a standard accounting method in which every transaction is recorded at least twice. Each transaction affects at least two accounts and has at least one debit and one credit. The system for recording debits and credits follows the accounting equation (assets = liabilities + owner’s equity). The left side of an account is the balance for assets, dividends, and expenses, and the right side is the balance for liabilities, common stock, and revenues. At any point in time, the total of the debit entries and the credit entries must be equal.

The advantages of using the double entry system is that it provides a greater degree of accuracy, since the total amount of debit entries must equal the total amount of credit entries. This also makes producing financial statements and reports easier. The trial balance can be drawn up at any time to prove the accuracy of records. It allows a company to track their debtors and creditors in more easily. The double entry system also provides a clearer picture of a company’s performance and financial position at any given time. And any falsified entries are more easily detected, preventing the risk of fraud.

The disadvantages of using the double entry system are that double entry bookkeeping can be more complex, and harder to understand, when more than two accounts are impacted by a transaction. The cost of maintaining the double entry system can be high. And it is more time consuming since every transaction is entered twice.

While the double entry system has both advantages and disadvantages, it does provide a greater degree of accuracy. I have no experience working in an accounting department or with accounting software but I would choose the double entry system since accounting accuracy is vital for any company. Accurate bookkeeping is “required for managers to understand the financial status of their businesses in order to keep them solvent and offer a degree of transparency to investors”...