Advantages And Disadvantages Of Double Entry System

Accounting , Finance
Advantages/Merits/Benefits Of Double Entry System

Major advantages of double entry bookkeeping system can be highlighted as follows:

1. Systematic And Scientific Method

Double entry book-keeping is scientific and systematic system of recording the financial transactions of the business. It is guided by specific rules, principles and techniques.

2. Complete System Of Accounting

Double entry system records both aspects (debit and credit) of each transaction. So, it is a complete system of book keeping.

3. Suitable For Large Companies

It is suitable for large business companies with large volume of financial transactions and resources.

4. Ensure Arithmetical Accuracy

Trial balance is prepared under double entry system. Therefore, it ensures arithmetical accuracy of accounting records.

5. To Obtained Profit Or Loss

Profit or loss of a company can be obtained by preparing profit and loss account at the end of the accounting period.

6. To Know The Financial Position

Balance sheet is prepared at the end of the year. It helps to know the actual financial position of the business.

7. Helps Decision Making

Double entry system provides provides financial data, profit, loss and financial position of the business firm. So it helps the management to take appropriate decision for the betterment of business.

8. Comparison Of Results

Financial results of current year can be compared with the result of previous year which helps the management for future planning.
advantage disadvantage double entry system
Disadvantages/Limitations/Demerits Of Double Entry System

The main drawbacks or disadvantages of double entry book-keeping system can be pointed out as follows:

1. Complex System

Double entry book-keeping is complex system of recording the financial transaction of business. It requires complete accounting knowledge to maintain the books of accounts. It is not easy to understand this method of accounting.

     Also Read:

2. Time And Cost Consuming

It requires more time to record financial transactions in the books of accounts. It requires more money to install and maintain double entry book-keeping in the organization. So, it consumes more time, money and effort as compared to single entry system.

3. Unsuitable For Small Firms

Double entry system is nor suitable for small business organizations having less number of financial transactions and resources.
Read more »
By
Tags ,

Advantages And Disadvantages Of Internal Check

Accounting , Business
Advantages/Merits Of Internal Check System

Main advantages of internal check system can be studied as follows:

1. Division Of Work

Internal check ensures proper work distribution to the employees. Accounting and operational works are distributed according to the qualification, skills and experience of the employees.

2. Easy Location Of Errors

Internal check system helps to discover errors and frauds very quickly because errors of one staff is detected by another. So, errors and frauds can be prevented before the audit.

3. Greater Efficiency

Internal check helps to increase efficiency of the employees which leads to higher productivity.

4. Preparation Of Final Accounts

It makes possible to prepare final accounts of the company (trading account, profit and loss account and balance sheet) in short time which facilitates final audit.
advantages disadvantages of internal check
5. Helpful For Auditor

Auditor can conduct final audit in short time with less effort because there is no need to examine all the accounting records in details.

6. Suitable For Large Business

It is very suitable for large business firms with many staffs, large financial transactions and large resources.

Disadvantages/Demerits Of Internal Check System

Some notable drawbacks or disadvantages of internal check system can be highlighted as follows:

1. Not Suitable For Small Firms

Internal check requires more effort, more time and more staffs. So, it is unsuitable for small business organizations having less transactions and resources.

     Also Read:

2. Creates Confusion

Internal check may create confusion among the staffs which may lead to conflict.

3. Decrease In Work Quality

Auditor completely depends on internal check while conducting final audit. It may decrease the quality of his work.

Pros And Cons Of Internal Check In Short

Pros:
- It promotes division of work
- It makes easy to locate errors, frauds and loopholes
- It boosts employee efficiency which helps to improve productivity
- It is helpful for final audit

Cons:
- It consumes extra time and cost
- It is not useful for small organizations
- It may create misunderstanding, confusion and conflict among the staffs in the firm
Read more »
By
Tags , ,

Advantages And Disadvantages Of Internal Audit

Accounting , Business
Merits/Benefits Or Advantages Of Internal Audit

The main advantages of internal audit can be highlighted as follows:

1. To Discover Errors And Frauds

One of the main benefits of internal audit is that helps to discover accounting errors and frauds so that they can be rectified before the final audit.

2. To Maintain Proper Accounting

It helps to maintain proper accounting system in the organization. It ensures accuracy and authenticity of accounting records.

3. Provides Base For Final Audit

Internal audit examines and verifies entire books of accounts and locate mistakes and frauds. So, conduction of final audit becomes easier.

4. Increase Employees Efficiency

Internal audit alerts the staffs by checking their performance regularly. It helps to increase their efficiency and also helps to minimize errors.

5. Proper Utilization Of Resources

Internal audit ensures proper utilization of resources by detecting their misuse. It helps to increase operational efficiency and productivity.

advantages disadvantages internal audit

6. Valuable Suggestions

It gives suggestions and instructions regarding the financial and operational activities of the organization. So it helps to maintain better management, proper supervision and effective control.

Disadvantages/Drawbacks Or Demerits Of Internal Audit

Some of the notable disadvantages of internal audit can be highlighted as follows:

1. Not Suitable For Small Firms

Internal audit is not suitable for small business organizations with less financial and operational activities.

2. Not Acceptable

It is conducted for internal purpose only. It is not accepted by shareholders and other external users.

      Also Read:

3. Chance Of Errors

There may be a chance of errors because of the poor knowledge of the audit staff.

4. Time Consuming

It takes a long time to perform internal auditing. It may disturb regular office work.

Pros And Cons Of Internal Audit In Short

Pros:
- It detects frauds, mistakes and loopholes in the accounting system
- It makes easier to conduct final audit
- It helps to improve operational efficiency
- It provides useful information and suggestions to the management
- It is suitable for big business organizations

Cons:
- It is not useful for external reporting
- It consumes more time and effort which may hamper routine activities in the firm
- It is not suitable for small organizations having limited number of financial activities
- It may lack accuracy because of limited knowledge of internal audit personnel
Read more »
By
Tags ,

Advantages And Disadvantages Of Management Audit

Accounting , Business
Merits Or Advantages Of Management Audit

The main advantages of management audit can be studied as follows:

1. Helps In Structural Improvement

Management audit examines the functions of management and identifies the strength and weakness in management process. So, it helps to improve organizational structure according to the plans and policies of the firm.

2. Provides Valuable Suggestions

After reviewing the defects and deficiencies, it provides appropriate suggestions which helps to increase management efficiency.

3. Utilization Of Resources

Management audit helps in proper utilization of organizational resources to achieve predetermined goals and objectives.
advantages disadvantages management audit
4. Helps In Decision Making

It helps the management to take various decisions such as make or buy, sell or process further, special order, drop or continue decision etc.

5. Increase Profitability

Management audit helps to increase profitability of the firm by minimizing wastage and by utilizing resources properly. 

Demerits Or Disadvantages Of Management Audit

Some major disadvantages of management audit can be highlighted as follows:

1. Expensive System

Management audit is a costly method of auditing. So, it is not suitable for small firms having limited resources.

     Also Read:

2. Not Well-defined

Management audit lacks fixed methods and techniques of auditing. So, it is not well defined.

3. Not Suitable

Management audit provides only theoretical suggestions to the management which are not suitable or applicable to solve practical problems. 
Read more »
By
Tags , ,

Advantages And Disadvantages Of Interim Audit

Accounting , Business
Advantages Or Merits Of Interim Audit

The main advantages of interim audit can be discussed as follows:

1. Less Expensive

Interim audit is less costly than continuous audit.

2. Suitable For Big Firms

Interim audit is very suitable for large and dynamic type of business organizations.

3. Helpful For Final Audit

Final audit can be conducted in short time because of interim audit.

4. Early Detection Of Errors

Errors and frauds can be located before the final audit. It helps to correct such errors and frauds in time.

5. Moral Check

It creates moral pressure on the employees to perform accounting jobs effectively. It also helps to eliminate mistakes and frauds.
advantages disadvantages interim audit
6. Interim Dividend

A firm declares interim dividend after conducting interim audit.

Disadvantages Or Demerits Of Interim Audit

The main disadvantages of interim audit can be studied as follows:

1. Alteration Of Figure

Already audited accounting figure may be changed by a dishonest employee. It may create difficulty in final audit.

2. Work Burden

Audit notes have to be prepared after the completion of interim audit. It increases the burden of work.

3. Unsuitable For Small Firms

Interim audit is not suitable for small business organizations with less financial transaction.

      Also Read:

4. Disturbance At Work

Interim audit disturbs the working environment in the office. Regular office activities may be hampered because of audit work.

5. Increase Expenses

Interim audit increases the expenses of the business.

Pros And Cons Of Interim Audit In Short

Pros:
- It consumes less cost and time
- Errors and frauds can be detected quickly
- It makes final audit easier
- It is suitable for big firms to publish interim figures

Cons:
- It may disturb regular office work
- There is a possibility of falsification of financial figures by dishonest employees
- It is not suitable for small business firms
- It increases the work load of audit staff
Read more »
By
Tags ,

Advantages And Disadvantages Of Final Audit

Accounting , Business
Merits Or Advantages Of Final Audit

Main advantages of final audit or periodical audit can be highlighted as follows:

1. Suitable For Small Firms

Final audit is very suitable for small business concerns with less number of business transactions and resources.

2. Low Cost

Periodical audit or final audit is conducted after the end of every financial year. So, it takes less cost and effort than continuous audit.

3. No Alteration Of Figure

Periodical audit is conducted only after the completion of entire accounting works. So, there is no chance of alteration or manipulation of figures.

4. No Disturbance At Work

In continuous audit, auditor frequently visits the office which may disturb the working environment. But in periodical or final audit auditor visits office only at the end of the accounting period. So, final audit does not hamper regular office work.

5. Reasonable Time

Final audit takes less time than continuous audit because auditing can be performed continuously without break.

6. True Profit Or Loss

Final audit examines the profit and loss account of the company which helps to know the true profit or loss of the business.

7. True Financial Statement

Balance sheet is properly checked by the auditor at the end of every year. It helps to know the actual financial position of the business.

8. Increase Goodwill

Periodical audit provides up-to-date information about profit, loss, financial position of the business. It helps to increase goodwill and image of the business.

Disadvantages Or Demerits Of Final Audit

Major drawbacks or disadvantages of final or periodical audit can be highlighted as follows:

1. Chance Of Error

Final audit is conducted only once in a year. So, books of accounts cannot be examined and verified properly. Due to the lack of in-depth checking there is a chance of leaving errors while conducting audit work.
advantages disadvantages final audit
2. Shortage Of Time

It is very difficult to conduct the audit of whole year in a given time frame.

3. Not Suitable For Large Companies

It is not suitable for large business companies with large volume of transactions and resources.

      Also Read:

4. Low Moral Check

In periodic or final audit, auditor does not visit clients' office frequently. So, staffs may feel free to commit frauds and errors because of no moral pressure.

Pros And Cons Of Final Audit In Short

Pros:
- It takes less cost, time and effort than continuous audit
- It shows actual profit or loss and financial health of the company
- It provides financial data and information to both internal and external users of accounting information
- It does not disturb regular organizational activities
- It improves the image and goodwill of the firm

Cons:
- It is difficult to detect planned errors and frauds
- There is a possibility of misrepresentation of financial data
- It will be difficult for the auditor to finish auditing task in limited time
Read more »
By
Tags ,