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. Double entry bookkeeping accounts to writing for every transaction – a debit amount to an equal credit amount.
Q. Are you facing difficulties in maintenance of double entry bookkeeping?
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 writing it assures lesser mistakes and accountability. 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 method, when you make entry of a transaction debit amount should be equal to the credit amount. This ensures that your accounting is correct. It shows the profit and loss statements of the company. But at the same time, one needs to re-check the calculations to avoid problems and mistakes. At times a wrong entry can also give you debit amount equal to credit amount. So, always check if your entries and end results are correct. It ensures arithmetic accuracy.
Double entry book keeping helps you prepare a balance sheet. This sheet clearly talks about your financial position. It shows where you stand in the growth chart. It also talks about all the expenditure you make and where you earn profits. The advantage of this is that, one can also check where to reduce costs and where to invest. It provides the necessary information required to take decisions by the top authority of the company.
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. So, no alterations can be made to this method of writing financial transactions.
The world has moved on to laptops, tablets and software’s to maintain as well as to do the accounting. Enterprises must have a double entry system in accounting. So double entry book keeping may sound boring, old fashioned and time consuming but always remember the saying that “Old is Gold”. Thus it is the most ancient and credible method used for accounting even today. The biggest advantage of double entry book keeping is that there are very few to zero chances of manipulation. Once an entry is made it is difficult to erase and show wrong accounts. It may be time consuming, but it is the safest method for accounting.