Answer :

Merits of double accounting system

1) Complete and Scientific: As it is based on definite principles and rules hence the scientific method of accounting and keeps different types of accounts. There is no chance of error because every transaction is entered twice. If any errors are left it is easily depicted

2) Basis of Account is Reliable: It is completely accountable as every entry is done twice in two books – once in Debit, other in Credit and same amounted in entered in both accounts. From these accounts, the trial balance is prepared which proves the reliability of this system.

3) Profit and loss statement: Separate ledgers are made for every type of transaction, like expenses, income, payable, receivable et Hence, at any time businessman can get status of profit and loss of particular period.

4) Economic status: under this system separate accounts of all the assets and liabilities is kept and accounting and adjustment of the personal item are also kept, it means that businessman can create a balance sheet and get right financial position on that date.

5) Easy access to information: As separate accounts are made for sale purchase, payment and received, and hence everything could be calculated easily.

6) Less possibility of fraud and Forgery: If any person does any fraud, he could be caught easily as each transaction has two accounts

7) Comparative study: At the end of financial year profit and loss statement and balance sheets etc are prepared which could be compared with the same statement of last year to check the performance of business year.

8) Legal Recognition: It is legally recognised by the Company Act, bank, insurance, MNCs. Hence, all big companies are bound to keep their accounts act to this method.

Demerits of double accounting system:

1. No effect when an account is left – if the person making an entry using a double accounting system, and if he or she has forgotten to enter entry, it cannot be verified as it will be missing in both accounts

2. Difficult to find Compensatory error – compensatory error is like if you buy something of 500 Rs, but mentioned it as 5000 in both accounts, it won’t affect trail balance and it will be difficult to identify.

3. No effect of right entry in a wrong account, like if entry is made into some other person account, it will be difficult to find a mistake when there are two accounts, credit and debit and amount is same, but the account is wrong.

4. it is a costly method as many heavy registers have to be maintained. But such expenditure is negligible for big business houses compared to its utility.

5. Specially trained and skilled people are required to maintain such records.

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