Give the four reasons of the popularity of double entry system. Ans. Reasons of the popularity of double entry system.
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- Scientific System: Double Entry System is a scientific system of recording business transactions as compared to other systems of Book Keeping. It helps attain the objectives of accounting.
- Complete Record of Transactions: Under the system, both sides of a transaction are recorded. It is a complete record as it results in showing correct income or loss, assets and liabilities.
- Arithmetical Accuracy of Accounts is Ensured: By the use of this system, arithmetical accuracy of the accounting work can be established through the Trial Balance.
- Determining Profit or Loss: Profit earned or loss incurred during a period can be determined by preparing Profit and Loss Account.
- Knowledge of Financial Position: Financial position of the firm or the institution can be ascertained at the end of each period by preparing the Balance Sheet.
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