Question

Describe the merits and demerits of Double Entry System of Accountancy.

Answer 1

Answer:

because any other person does not cheet with him

Answer 2

Answer:

Explanation:

The following are some of the merits of Double Entry System of Accountancy:

• Under this system both personal and impersonal accounts are maintained as a result  the effects of both the transactions are recorded.

• It helps in maintaining the arithmetical accuracy of the books of accounts as for every debit, there has to be a corresponding and equal credit.

• It helps in preventing frauds which can be detected at the early stage and even reduces frauds.

• Any error can be easily be checked and rectified .

• As personal accounts are maintained under this system the balances of payables and  receivables can easily be determined.

• Helps in comparing the financial position of the past years with the current year and thus helps in decision making.

• The net operating results  can be derived by making the Trading and Profit and Loss A/c  as well as the financial condition can be derived through preparation of the Balance sheet for a particular year.

• The stakeholders like banks, suppliers and others can gauge through this system before providing grant of loans or credit.

Demerits

• The system however fails to throw light on all the errors made in the books of accounts.

• The trial balance which is prepared under this system fails to disclose certain types of errors.

• Maintaining accounts under this system is a costly affairs as it involves maintenance of quite a numbers of books of accounts.

Hope this helps.