Business is not all about the idea and the money you invest. A secret to the success of every business is double-entry bookkeeping. Double-entry book keeping or double-entry accounting has many advantages. Maintenance of cash records is very crucial for controlling the organization efficiently and effectively. It helps you record two aspects of every financial transaction. This is the basic system used by organizations to record financial transactions. The basis for the Double entry system of bookkeeping accounts is – for every credit there is an equal amount of debit and vice-versa.
Q. Are you facing difficulties in maintaining accounts in the double entry bookkeeping system?
Q. Don’t you know the advantages of double entry bookkeeping?
Here are some tips from Kuza Biashara, on double entry bookkeeping:
Double entry method
The double entry method is the most commonly used method for maintaining financial transactions. This way of maintaining accounts ensures you of lesser mistakes and easy way of book-keeping. Double entry method follows the “T” way of writing accounts. In this method a sheet is divided into two halves, with one column on each side. It appears like “T”. To the right of the “T” will be the credit amount and to the left of the “T” will be the debit amount. In this system, when you make an entry of a transaction debit amount, it should be equal to the credit amount. This ensures that your accounting is correct. But at the same time, one needs to thoroughly check your calculations to avoid errors. There is also a possibility of compensatory errors. So, check your entries and make sure that your results are correct to ensures arithmetic accuracy.
Balance Sheet
Double entry book keeping helps you prepare a balance sheet. The balance sheet clearly talks about your financial position on any given date. It shows where you stand in the growth chart. The balance sheet also shows your income and expenditure and whether you are making a profit or loss. The balance sheet is one of the most important financial document of any business.
It prevents frauds
The biggest advantage of double entry book keeping is that it prevents frauds. No person can manipulate the account books to show a false calculation. It is also difficult to show small changes in the books, as it will give different results and lead to confusion. It is difficult to make alterations and manipulations in this method of book-keeping. With modern technology, it is no longer a hassle to maintain accounts manually – it can be easily done on the computer through various accounting software packages.
Entrepreneurial Learning
The world has moved on to laptops, tablets and software’s to maintain all computer activities including accounting. Though double entry book keeping may sound old fashioned, it is one of the most trusted and credible method used for accounting even today. It may be time consuming, but it is the easiest method for accounting.
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