Similarly, Current Assets and Current Liabilities are recorded in the General Balance Sheet. Prohibited Content 3. The Double Account System is a method of presenting the annual final accounts/annual financial statements of public utility undertakings, like Railways, Electricity, Gas, Water Supply, Tramways etc. Privacy Policy 8. Double entry system is acknowledged as the best method of accounting in the modern world. 2. 3. Content Filtration 6. Example of a Double-Entry System Public utility concerns are not expected to aim at profit. Many accounting students find the usage of these words confusing. The double account system does not maintain accounts and is rather used to present financial information in a clear manner to the public. Double Account System: Features, Advantages and Disadvantages! (f) Discount and Premiums are permanently treated as capital items. Account System, Accounting, Double Account System, India. Luca Friar Pacioli is known as the originator of the Double entry system. 4. ADVERTISEMENTS: 3. Double Entry System: Defined, Features & Principle Explained. (d) It is not always possible to understand the accounting statements and forms by the ordinary people. As stated above, the Balance Sheet is bifurcated into two parts – Receipts and Expenditure on Capital Account and General Balance Sheet. (g) Loan capital (debentures) Shares and Stocks are treated as capital items. Content Guidelines 2. 4 Accounting Assumptions. Similarly, current assets and current liabilities are recorded in the General Balance Sheet. (d) Since these concerns enjoy almost monopoly rights given by the Govt., the Govt, may understand whether the concern supplies the efficient service at reasonable cost or not after analysing its prescribed format of accounting. Some of the disadvantages of Double Account System are presented below: (a) Capital Account incorporates the value of an asset whose life is very short. For example, the benefit receiver is given the name 'debit' and the benefit giver is given 'credit'. Many try to understand them by trying to draw an analogy with something they already know like plus and minus. Generally, a public utility undertaking needs a large amount of capital which is invested in the acquisition of fixed assets. The double entry system is the one widely used and recognized in the accounting world. Prohibited Content 3. Double entry accounting, also called double entry bookkeeping, is the accounting system that requires every business transaction or event to be recorded in at least two accounts.This is the same concept behind the accounting equation.Every debit that is recorded must be matched with a credit. (b) Since all Assets are recorded at cost and not the written-down value, the Balance Sheet does not exhibit a real position. Copyright 10. Before publishing your articles on this site, please read the following pages: 1. These two terms (debit and credit) are very important to understand if you really want to have clear concept of double entry book keeping system. One account needs to be debited and the other is to be credited. Quickly browse through hundreds of Accounting tools and systems and narrow down your top choices. The advantages of Double Account System are: (a) As Depreciation fund is compulsorily created and invested in outside securities, it helps to replace an asset without affecting the liquid resources, viz., Cash, of the concern. Learning about the various types of accounting systems can help in the decision. One is referred to as `debit` and the other is referred to as `credit`. Fixed Assets and fixed or long-term liabilities are recorded in Receipts and Expenditure on Capital Account. 10. The main features of Double Account System are: (a) Generally, a public utility undertaking needs a large amount of capital which is invested in the acquisition of fixed assets. Double entry system of accounting is based on the Dual Aspect Concept. Single entry system is simple and less expensive to maintain as compared to double entry system. (b) Revenue Account and Net Revenue Account are prepared instead of Profit and Loss Account and Profit and Loss Appropriation Account. So, Revenue Account is prepared instead of Profit and Loss Account. General Reserve, Investment Fluctuation Reserve and other reserves are shown in the General Balance Sheet on the liability side. Types of Accounts in Accounting. Copyright 9. It is not a system of maintaining account, but only a system of presenting the final accounts. Double Entry System of Accounting is a system under which each transaction is regarded to have two-fold aspects and both the aspects are recorded to obtain the complete record of dealings. Image Guidelines 4. For this purpose two-chamber Balance Sheet is prepared—the first part being Receipts and Expenditure on Capital Account and the second part being the General Balance Sheet. (g) Proper distinctions between revenue expenditure and capital expenditure is not possible under this system. Generally, a public utility undertaking needs a large amount of capital which is invested in the acquisition of fixed... 2. Double Account System: Meaning, Features and Advantages | Electricity Accounts Meaning of Double Account System:. Double-entry bookkeeping, in accounting, is a system of book keeping where every entry to an account requires a corresponding and opposite entry to a different account. Definition of double account : a system of accounting prescribed by British law for railway and public utility enterprises whereby permanent capital is offset against fixed assets purchased with monies contributed from permanent capital The conventional Balance Sheet is intended to reflect a true view of the financial position of a concern as at a particular date. When choosing an accounting system, the decision should take into account the price of the accounting system, the extent the system will be used, and the capacity of the user to learn to operate the system. TOS 7. System. Double Entry Accounting System is an accounting approach under which each and every accounting transaction requires a corresponding and opposite entry in the accounting records and the number of transactions entered as the debits should be equal to that of the credits. (c) Normally, no adjustment of asset is made in the Capital Account. It is not a system of maintaining account, but only a system of presenting the final accounts. Since the debit account offsets the credit account, the total of both the sides become equal at the time of … According to the Dual Aspect Concept, each business transaction has a dual or a two way effect. Those assets appear in the account at their scrap value—although these are shown at a higher value. Accounts must be appropriately credited and debited for following Double Entry System. When setting up the … In this article we will discuss about the important features of double account system of accounting. Annual Accounts, that is, Final Accounts, consist of: (c) Receipts and Expenditure on Capital Account; and. It has already been stated that depreciation is not deducted from the asset concerned but the same is shown as a liability by way of fund; as such, Fixed Assets are recorded at book value. (f) Since repairs and renewal expenditures are charged to revenue account of the same year, profit of the undertaking, particularly on that year when no expenditures on repairs and renewals are incurred, is affected. (d)Depreciation is not deducted from the asset concerned but the same is shown as a liability by way of a fund. As business and trade began to flourish, merchants needed a way to keep accurate financial records and record more complex transactions — and so double-entry accounting was born.In 1494, Friar and mathematician, Luca Pacioli, wrote the first book on double-entry accounting: the Summ… Before uploading and sharing your knowledge on this site, please read the following pages: 1. Thus, for each transaction, one aspect is debited and another aspect is credited. The double entry system is based upon universally accepted accounting concepts and conventions which we follow while maintaining our books of accounts. However, debits and credits are distinctly different from plus and minus. 8. (e) In order to replace an asset for improved means it may not always be possible to determine exactly the amount of revenue expenditure items which should be charged. The double entry system of accounting has two sides, namely Debit and Credit. Account Disable 11. That is why, in order to overcome this difficulty, some undertakings may even open a separate account viz., Repair and Renewal Reserve. It is based on the rule that debit should be equal to the credit. However, the double account form of Balance Sheet is intended to show fixed capital investment, and the source from which the amount is raised. 1. The double-entry has two equal and corresponding sides known as debit and credit.The left-hand side is debit and right-hand side is credit. Image Guidelines 5. Following are the main advantages of double entry system: Under this method both the aspects of each and every transaction are recorded. Debits and credits are essential to the double entry system. A general ledger is a two-faceted accounting form that features credits and debits. Therefore, fixed assets, fixed liabilities and current assets, current liabilities are to be separately dealt with. (b) Revenue account represents the operating activities which expresses the operating result of the undertaking while extraneous items are recorded on Net Revenue Account which expresses the real operational result. Using Accounting Software . Report a Violation, Single Account System and Double Account System | Difference, Double Account System and Single Account System | Differences, Revised Forms of Balance Sheet and Profit and Loss Account | Bank Accounting. Let us make an in-depth study of the meaning, features, advantages and disadvantages of double account system. (c) Capital account includes the items like preliminary expenses which are also considered in Single Account System. Report a Violation 10. It should be remembered that accounts of Industrial undertakings, other than Railways and Electric Supply, are prepared as per Indian Companies Act, 1956. Disclaimer 8. DOUBLE ENTRY SYSTEM OF ACCOUNTING. Dual Aspect Concept is one of the fundamental accounting principles. For this purpose, the double account system was introduced for public utility firms. This type of accounting system is more preferable to start-up businesses. The accounts of the company are maintained under the double account system. A transaction is divided into two aspects, Debit and Credit. 3. Most accounting software for business uses double-entry accounting; without that feature, an accountant would have difficulty tracking information such as inventory and accounts payable and preparing year-end and tax records. . Double entry book keeping system is based on the premise that every financial transaction has two aspects. The object of this system is not to show the financial position at a particular date but to disclose how the capital is being raised and the application of the same, in the acquisition of different fixed assets. The basic double-entry accounting structure comes with accounting software packages for businesses. All the business transactions recorded in the books of accounts are based on this principle of accounting. The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits. As there are two sides, there are two effects, one on the debit side and another on the credit side. It is expected that the accounting principles should be feasible, predictable, and applicable. 5. It is generally adopted by public utility concerns formed under special Acts of Parliament. Uploader Agreement, Read Accounting Notes, Procedures, Problems and Solutions, Learn Accounting: Notes, Procedures, Problems and Solutions, Double Entry System and Double Account System | Accounting, Double Account System: Problems and Solutions | Accounting, Advantages and Disadvantages of Double Account System | Accounting, Double Account System Maintained by Electricity Companies, Fund Flow Statement and Income Statement| Accounting. For example, if there are fixed assets shown in the balance sheet, then the replacement cost will be difficult, and variation and people will cause variation and market price. (c) The capital account helps us to understand the source of capital in various forms and the application of same in the form of various fixed assets. Double entry bookkeeping is a method of accounting, which is the basis for the formation of documented systematized information about accounting objects. (h) Interest on Loan and Debentures (i.e., all fixed interests) are to be charged against Net Revenue Account.