Double entry bookkeeping

Different Benefits of Double Entry Bookkeeping

Double entry bookkeeping is a method of bookkeeping whereby credits and debits are recorded twice, once by the business and once by the owner of the business. This double entry method makes the bookkeeping less complicated and also more accurate. Double entry bookkeeping involves two entries for each transaction, debit in one place and credit in the other. This helps the owner of the business to track all his transactions better and also has the advantage of eliminating any kind of potential errors in the financial records.

Double entry bookkeeping is also known as single entry bookkeeping. It’s an accounting method where each transaction has an opposite entry to another account. This makes the financial transactions more comprehensible and leaves no scope for any kind of confusion or uncertainty in the financial statements. 

Double entry bookkeeping saves a lot of time and provides several benefits to the managerial staff. They have more time available to concentrate on other important aspects of the business like growth and expansion, budget planning, cost control, human resource management etc.

Double entry bookkeeping system first involves debit transactions, where the debits are written down and debited from the savings. The next step involves credit transactions, where the credits are written down. This way all the transactions in the ledger record the cash transactions, including the debit and credits. 

A double entry bookkeeper makes the entries twice so as to create a trail of transactions leading to the financial statement. This is very necessary for the purpose of accountability and also helps the management to minimize the frauds.

Every entry made in the double entry bookkeeping system is checked against the previous and future transactions so as to ensure correct timing of debit and credits. Timing is very important in any business. An irregular flow of cash can lead to huge losses in your business. It can lead to your company being shut down.

Apart from this, there are many other benefits of double entry bookkeeping. This kind of method helps the company to control its liabilities and also minimizes the risk of its assets being seized by creditors. 

Double entry procedure keeps a track of all the debits and credits, even when they are in the payable status. This is because when you enter the accounts, debits will be debited off and credits will be credited automatically. The accounts also remain updated even when payments are received or paid off.

The main objective of a company in any form is to obtain funds in the shortest period of time and at the cheapest interest rate. To achieve this target, it must be able to maintain a balance between its assets and liabilities. Using double entry bookkeeping method will help in achieving this goal. This method will enable the company to keep a track of its debits and credits and even prevent it from being cheated by its creditors.