Double Entry System Concept
- If each and every financial activity is recorded by using the rule of debit and credit then such modern, systematic, scientific and fundamental concept of accounting is called double entry system.
- It has a two-fold effect on the accounting process.
- The double entry system is a modern system of bookkeeping based on duality principle propounded by Luca De Pacioli on 1494 A.D. from his book “Summa de Arithmetica” on “Accounting of Venice” chapter.
- The double entry system is a fundamental and scientific system. (fundamental + scientific)
- Double entry system prevents accounting frauds errors.
Double Entry System Equation
Assets = Equity +Liabilities
Features of Double Entry System
- It has a double effect of every financial transaction
- Equal effect on both sides
- A complete, scientific and reliable method of accounting
- Helpful to prevent frauds and errors
- Flexible for the correction in the process
- Useful for internal control system
- Concept of debit the receiver, credit the giver.
- It keeps the full recording of economic transactions
- Helpful to make final accounts
- Easy to analyze and help to make comparable financial statements
- Complex to understand, time-consuming, expensive and not suitable for small organizations
- A universally accepted rule of accounting
Principles of Double Entry System
- Principle of debit and credit
- Principle of two-fold effects
- Principle of equality
- Principle of preliminary entry
- Principle of accounting posting
Double Entry System in Nepal
In B .S.1993, Biratnagar Jut Mill used the double entry system for the first time in the private sector in Nepal.