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Double Entry System in Accounting and Bookkeeping

Sakshi Jain
Sakshi Jain at March 13, 2023


Accounting is an art of identifying, recording and summarizing the financial transactions that are measurable in terms of money and analyzing the result thereafter. Further, there are two ways to maintain accounts and they are Single and Double Entry System of Bookkeeping. But generally, the monetary transaction is recorded in the Double Entry Bookkeeping for more suitable accounting results.Here, we will discuss that what do you mean by double entry system, double entry system of accounting.

What is the Double Entry System of Accounting?

Double Entry System of bookkeeping handles with two or more accounts for every monetary transaction. For instance, a person sold an item of furniture in the market. So, in the Double Entry System, it will increase the cash balance account and simultaneously will decrease the furniture account with the respective amount under Double Entry System.

It's a central idea enveloping accounting and bookkeeping in present occasions. Each money related exchange has an equivalent and inverse impact in something like two unique accounts. The equation can be:


Recording System

Double Entry system records the monetary transactions in terms of Credit and Debit item. Double Entry System impact both side of accounts, for instance, a debit entry in one account also impacts the credit side of another related account or accounts. In simple words, in India, there is a Double Entry System that ensures that the sum of all Debit account is equal to that of Credit accounts. This strategy for accounting and double-entry bookkeeping results in the exact portrayal of financial position. In addition to this, it also brings down the rate of blunders by recognizing them timely.

Types of Accounts

The accounting and bookkeeping process measures, records and imparts everyday monetary activities or transactions. A transaction is an event that can be classified in monetary terms, for instance, an exchange of goods and services between a buyer and a seller. Further accounts are of three types:

  • Personal Account
  • Real Account
  • Nominal Account

Under a precise accounting process, the financial activities are recorded into different accounts to keep the information bifurcated and arranged under particular account heads. There are significantly seven sorts of accounts wherein all the business accounting transactions and entries are grouped. These accounts are:

  • Assets
  • Equity
  • Liabilities
  • Profits
  • Losses
  • Expenditure
  • Revenues

As the operations of a business are dynamic, the accounting and bookkeeping is a constant procedure of following changes in each account.

Debit and Credit

Debits and Credits are basics in a double entry system of bookkeeping and accounting. At the time of posting an accounting entry, an entry on the left half of the account ledger is a debit entry and right side entry is a credit entry.

At last, to finish an entry the aggregate of the Debit side and the Credit side ought to be equivalent. All debits don't generally increase the account nor do all credits decreases the accounts. A debit entry may increase one record and in the meantime decline another record.

Stages of Double Entry System

To record a transaction as per the double entry bookkeeping system below are the processes which will describe the procedure from journal to final account.


The financial transactions are recorded in the journal commonly known as journal entries.


After recording in the journal the entries are classified and posted in the ledger.

Trial Balance:

After posting in a ledger the closing balance will be transferred to the Trial balance for summarization.

Final Accounts:

With the help of trial balance financial Accounts are prepared that helps the owner/shareholder to analyze the true and fair view of a business.


Advantages of Double Entry System

The double entry system is recognized as the best strategy for bookkeeping in the cutting edge world. Following are the fundamental advantages of the double entry system:

  • Under the Double Entry System, both the parts of every single transaction are recorded. So it is conceivable to keep the total record.
  • Using this system Profit & Loss Statement as well as Balance Sheet can be easily prepared. Further, this helps in analyzing the financial position of a business.
  • Through the Double Entry System, the accounts department can easily detect errors and omission in the various accounts.
  • Every statistical data are effectively accessible under this system which helps in taking correct decisions so as to run the business smoothly.
  • All the essential insights concerning transactions can be achieved rapidly and effectively.

Disadvantages of Double Entry System

In spite of so many advantages, double entry system has a few disadvantages which are discussed below:

  • Under Double Entry System, every financial transaction is recorded in books of accounts in 2 phases (journal and ledger) and 2 sides (debit and credit). This results in an increment of books of accounts in terms of number and size. Further, making the whole process complicated.
  • Double entry system of bookkeeping system requires a considerable time and human resources. So this makes a concern for the small businesses to maintain books of account under this system.
  • It requires master learning to maintain accounts under this system.
  • Due to the complexity of the double entry system, there is more prominent plausibility of submitting blunders and errors.

It is obvious from the above talk that the double entry system advantages far exceed its disadvantages. In this way, it is viewed as the best system in the cutting edge world.

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