Effectiveness of Double Entry Accounting System

1195 WordsMay 4, 20135 Pages
Giving examples, evaluate the effectiveness of the controls in the double entry system of accounting in ensuring the accuracy of the accounts. As well as examining the controls, your evaluation should consider errors that do not affect the balancing of the trial balance. Double entry accounting system was invented in 15th century and still being in use until today, this is quite an interesting fact; however it indicates that there is something about the system, thus making it so effective and irreplaceable. To evaluate the effectiveness of the controls in the double entry system, we should first question ourselves why is double entry book keeping system is still being used until today. Double entry book keeping is very useful because…show more content…
Accounting is making it easier to then demonstrate the outcomes and results of the business. With that being said, it is very clear that it is crucial for the accounts to be accurate. For the business it is important for the various reasons. First of all the business wants to see how well it is doing every year, that includes it’s gross and net profit, the worth of its assets and liabilities, etc. The accuracy of this information is vital, as the organisation’s leadership can then analyse this information and make decisions according to the outcomes. Second of all if the accounts are being produced inaccurate or incorrect, the organisation will most likely make wrong decisions, which may lead it to the loss of money or even bankruptcy. Secondly accurate accounts will help the day-to-day operations of the business. However stakeholders are also interested in the accuracy of the accounts for the various reasons presented below: Employees Employees of the business rely on accounts to receive the wages and salaries they have earned, this means that if accounts of the organisation are made inaccurately it may lead to employees receiving wrong amount of money, which is dreadful for various reasons. If the wages are overpaid, it means that the organisation has lost funds it shouldn’t have, whereas

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