‘A quick appraisal of the profit/loss is not possible in double entry system because many adjustments are required to ascertain the true financial position of the business.’ Then Why, is it advisable to business organization to opt for double entry system of recording the transactions?
Answers
Answer:
Double entry, a fundamental concept underlying present-day bookkeeping and accounting, states that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the accounting equation:
Explanation:
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Answer:
Double entry, a fundamental concept underlying present-day bookkeeping and accounting, states that every financial transaction has equal and opposite effects in at least two different accounts.
With a double entry system, credits are offset by debits in a general ledger or Account
The Basics of Double Entry
In the double-entry system, transactions are recorded in terms of debits and credits. Since a debit in one account offsets a credit in another, the sum of all debits must equal the sum of all credits. The double-entry system of bookkeeping standardizes the accounting process and improves the accuracy of prepared financial statements, allowing for improved detection of errors.
Types of Accounts
Bookkeeping and accounting are ways of measuring, recording, and communicating a firm's financial information. A business transaction is an economic event that is recorded for accounting/bookkeeping purposes. In general terms, it is a business interaction between economic entities, such as customers and businesses or vendors and businesses.
Under the systematic process of accounting, these interactions are generally classified into accounts. There are seven different types of accounts that all business transactions can be classified:
- Assets
- Liabilities
- Equities
- Revenue
- Expenses
- Gains
- Losses