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It is believed that industrial revolution might not be successful without double entry bookkeeping system. Businesses were expanding and becoming more complex during that period, and a more accurate accounting method was required. Thus, double entry system is used to allow business owners to understand their company’s financial status better. Since a business transaction must involve two accounts (e.g. an asset must have an asset claim), double entry system was used to record both of the transaction exchange.

This system records an organization financial transaction in at least two different ledger accounts. When a transaction is recorded as debit in one account, it will be recorded as credit in another account. So, there are two columns for each account. At the end, the total of debits must balance with the total of the credits. This is a useful tool to identify mistake during the recording.

There are many advantages of using double entry system. First, since each transaction is recorded two times, the record is more accurate. A trial balance can be done to support the accuracy of the recording. Second, errors are easier to be detected and corrected using double entry system. Besides, theft or other frauds are easier to be discovered. Third, an organization can have a clear idea of how much it has earned or lost. This is because this system allows the business owners to manage the trading and profit & loss account. In addition, financial sheet can be prepared directly through the accounts if this system is utilized. Fourth, this system allows the inclusion of assets and liabilities during the bookkeeping process. Thus, double entry bookkeeping system is required by large organizations that have to create assets and liabilities statement and need to maintain financial control.

However, there are some disadvantages for this system. First, this system is more complicated compared to single entry, and thus qualified professionals should be hired for this job. If not, the accounts can get quite messy. Consequently, it will be more expensive. Second, this system is more time consuming, for there will be double entry for every transaction. To sum up, double entry system may be necessary for larger organizations but unpractical for small organizations.

If you’re lucky enough to live in or around Utah, you can find a good book keeper in your local area who will easily be able to assist you in your financial record keeping.

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