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Double Entry System

Every transaction involving money or moneys worth has a two fold aspect, the receiving of a
value on the one hand and giving of the same value on the other. This two-fold nature in all
transactions must be recorded in the books and this gives to the term Double Entry Book-
Keeping.Munro and Palmer

Every business transaction has a two fold effect and that it affects two accounts in opposite
direction and if a complete record were to be made of each such transaction, it would be
necessary to debit the account and credit another account. It is this recording of the two fold
effect of every transaction that has given rise to the term double entry.J.R.Batliboi

Double Entry system

In double entry system, for every debit there has to be a corresponding credit. It is very
pertinent to follow that corresponding does not mean that there should only be one account to
be debited and credited. It simply means that the amount to be debited and credited has to be
the same, the number of accounts may be one each/more. For example when goods amounting
to say, Rs.1,000 are purchased and whole of the amount is paid instantly, purchases a/c will be
debited with this amount , credit being given to cash with the same amount. If say, only Rs.400
is paid and the balance of the amount is to be paid afterwards, cash a/c will be credited with
Rs.400 and suppliers a/c will also be credited with Rs.600.

Advantages of Double Entry System


Double entry system is considered to be most systematic, scientific and immaculate system of
accounting, which is extensively used all over the world.

(1) Scientific system

(2)Complete record of business transactions

(3) Arithmetical accuracy of the books

(4) Ascertainment of profit/loss

(5) Information about financial position

(6) Lesser chances of fraud/misappropriation

(7) Helpful for the users of accounting information

(8) Helpful in matters related to the determination of various taxes

(9) Helpful in calculating and filing various claims


Disadvantages of Double Entry System
No doubt this system is considered to be complete and perfect but it is not free from be
wilderness. To make this system invincible there is an immediate need to delve, particularly in
its limitations.

(1) Complicated and difficult

(2)Maintenance of a large number of books

(3) Strict adherence to rules and regulations

(4) Certain types of errors are not disclosed

In spite of all the problems and limitations, this system is in vogue in almost all the countries of
the world. This system being based on dual system is free from many ambiguities.

ACCOUNTING FUNDAMENTALS

Accounting as Information System


Accounting is said to be the language of business. The basic objective of accounting is to make
the necessary information available to a variety of decision makers about financial results and
financial position of a business enterprise. By making such information available at the right
time it helps them in making rational and adroit decisions. Fathoming the complexities of the
system, the decision makers can minimize the chances of decision making in remnants.

As an information system, it collects and communicates economic information about a


business enterprise or other entity to a wide variety of persons whose decisions and actions are
related to the activity.Kieso and Weygandt

Todays accountant focuses on the ultimate needs of decision makers who use accounting
information, whether those decision makers are inside or outside the business. Accounting is
not an end in itself but is an information system that measures, processes and communicates
financial information about an identifiable economic activity.--Belverd R. Needles, Jr.

There are a number of persons and parties, who are interested in accounting information to
make their decisions rational and invincible. In the absence of necessary and timely information
the decisions are likely to be based on remnants. Accounting may be defined as an information
system, as it satisfies all its characteristics. It has a set of inputs and the outcome, called outputs,
is in the form of large volume of accounting ledgers/precise condensed reports. It has
standardized and almost universally accepted principles, which when applied to the inputs,
produce the relevant reports.
Users of accounting information:

(1)Creditors(short-term and long term, including banks and financial institutions

(2)Investors(present and potential)

(3)Management

(4)Employees

(5)Customers

(6)Government and its various agencies

(7) Taxation authorities

(8) Researchers

(9)Public

(10) Authorities dealing with environmental issues

Role of an Accountant in an organization


Accountants are the persons who are engaged in practicing the art of accounting. These people
with their educational background, specialized knowledge, extensive training, analytical mindset
and varied experience, are not merely suitable for the preparation of accounts, rather they are
best equipped to provide other related services normally desired by the management and the
society. This helps the management in discharging its duties effectively, efficiently and diligently
and thereby providing for immaculate utilization of scarce resources. Hence, the practice of
profession is not merely concerned with the preparation and maintenance of the books of
accounts in a mechanical and routine manner but it is also an invaluable instrument of socio-
economic and cultural transformation, steadfast to the welfare of the society at large. The
present day accountants are engaged in successfully discharging their multifarious activities
which are not only related to matters.

The services rendered by an accountant include among others:

To maintain the books of accounts so that they give a true and fair view

To provide opinions about the current state of fiscal/monetary policies

To act as a management information system consultant

To provide management consultancy services


To act as a statutory auditor

To act as an internal auditor

To act as a social auditor

To act as a taxation advisor

To act as a management accountant

To act as a financial advisor

To act as a company law advisor

To act as a liquidator

To act as an arbitrator

To act as a receiver

It can be concluded by saying that an accountant acts as the caretaker of the resources of
society in general and the enterprise in particular. He not only maintains the accounting record
of such resources but also ensures their fuller and optimum utilization. In the present day
scenario when there is global economic meltdown, these accountants are confronted with
numerous opportunities, challenges and threats, paving their way for innovative actions. In
addition to their role of recording business transactions, providing accurate timely and relevant
information, they will also be accepted to participate as business consultants and partners with
management in strategic planning process.

There are tremendous opportunities for the accountants to shine as a professional group by
showing their professional skills and capabilities. To fit in this role, the accountants need to
develop effective communication abilities, adopt a structured approach, a flexible outlook,
positive mindset and of course, keep themselves updated with the latest evolving technologies
in the field of information technology as well as in their own profession. The various accounting
software no doubt, have put some pressure on this profession, but taken in right perspective,
these software will help in supplementing their activities rather than supplanting.

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