Question

Define double entry system. Explain its characteristics

Answer 1

• The double entry system of accounting or bookkeeping means that every business transaction will involve two accounts (or more). For example, when a company borrows money from its bank, the company's Cash account will increase and its liability account Loans Payable will increase. If a company pays $200 for an advertisement, its Cash account will decrease and its account Advertising Expense will increase.

Characteristics of Double Entry System are stated below;

• Two parties: Every transaction involves two parties – debit and credit....
• Dual aspects: Every transaction is divided into two aspects. The left side of the transaction debit and the right side is credit.

Answer 2

Double Entry Accounting is the scientific, self-sufficient and accurate system of accounting which states that every transaction has a corresponding and an opposite effect of at least two accounts. The double entry system of accounting has two sides, namely Debit and Credit.

Characteristics :-

• Two parties: Every transaction involves two parties – debit and credit. According to the main principles of this system, every debit of some amount creates corresponding credit or every credit creates the corresponding debit for the same amount.
• Giver and receiver: Every transaction must have one giver and one receiver.
• Exchange of equal amount: The amount of money of a transaction the party gives is equal to the amount the party receives.
• Separate entity: Under this system business is treated as a separate entity from the owner. Here the business is considered as a separate entity.
• Dual aspects: Every transaction is divided into two aspects. The left side of the transaction debit and the right side is credit.
• Results: Under double entry system totality of debit is equal to the totality of credit. In it ascertainment of the result is easy.
• Complete accounting system: Double entry system is a scientific and complete accounting system.

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