Benefits of Double Entry Bookkeeping

Benefits of Double Entry Bookkeeping

Every business needs to keep account of its money in proper books. There are primarily two systems of bookkeeping: single and double entry. In single entry bookkeeping, only one entry is made for each transaction. This means that every transaction is recorded in only one account. For example, if a business owner withdraws money from the business's bank account for personal use, the transaction would be recorded only in the owner's equity account. 

On the other hand, double entry bookkeeping is a system in which every financial transaction is recorded in at least two accounts. The two accounts involved in each transaction are known as debits and credits. In double entry bookkeeping, the total of the debits must equal the total of the credits.

The main benefit of double entry bookkeeping is that it helps to ensure the accuracy and completeness of a company's financial records. Because every transaction is recorded in at least two accounts, it is easier to spot errors and omissions, and to ensure that the financial statements accurately reflect the company's financial position.

Additionally, double entry bookkeeping provides a clear and detailed record of a company's financial transactions, which can be useful for tax purposes, loan applications, and other business decisions. It also allows for the preparation of financial statements such as the balance sheet and income statement, which provide a snapshot of a company's financial position and performance.

Overall, double entry bookkeeping is a more comprehensive and reliable method of recording financial transactions, and is generally considered the standard for business accounting.