Chp-4 ~ Double Entry System

Question 1

What are the principles or characteristics of double entry system?

Answer 1

1. Every business transaction affects two accounts
2. Recording of both personal and impersonal aspects
3. Recording is made according to certain specified rules
4. Preparation of trial balance

Question 2

What are the advantage of double entry system? / What are the causes of the double entry system’s popularity?

Answer 2

1. Scientific system
2. Preparation of trial balance
3. Preparation of trading and profit & loss accounts
4. Knowledge of financial position of the business
5. Lesser possibility of fraud

Question 3

What are the disadvantage of double entry system?

Answer 3

1. A number of books are to be kept under this system. The system is quite expensive
2. It is quite difficult to apply the rule of debit and credit.
3. Only the arithmetical accuracy of account is checked by preparing a trial balance.

Question 4

What types of error are not disclosed under a double entry book keeping system?

Answer 4

1. Errors of omission
2. Errors of commission
3. Errors of principle
4. Compensating errors