What To Know About Double Entry Accounting?

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What To Know About Double Entry Accounting?
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Overview
In the late 1400s, Luca Pacioli, an Italian
mathematician and Franciscan friar, wrote the
first codified system describing double-entry
accounting. As a result of this publication,
double-entry accounting has become a popular
standard business practice, leading to today's
Generally Accepted Accounting Principles (GAAP)
in the United States and the International
Financial Reporting System (IFRS) in the rest of
the world. 
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What Is Double Entry Accounting?
In the double-entry system, every transaction has
two equal and opposite effects on business
finances. Let's say that a company purchases a
machine to manufacture a product it sells. The
purchase of the machine reduces the company's
cash balance while simultaneously increasing its
assets value. Due to this, recording the
transaction requires a debit, or decrease, in a
cash account and an increase, or credit, in a
capital account. Hire an accountant west Los
Angeles to know more.
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What Does Single-Entry Accounting Mean? 
When you record the checks, you write in a simple
ledger, you generally enter the data only once,
subtracting the amount from your checking account
balance. Also, when you deposit money into the
account, you will need to enter that data only
once. Every entry you make is either a debit or a
credit, never both. Compare your running check
book total with your bank statement at the end of
the month. You will probably compare line items
until you find the error if there is one.
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Advantages Of Double Entry Accounting System
Recording both sides of a transaction, give and
take, allows for an accurate picture of a
business' profit or loss. Financial statements of
one year can be compared with previous periods,
which can further aid in analyzing ups and downs.
With a double-entry system, accuracy is also
improved as a trial balance can be built to test
both debit and credit balances.
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Advantages Of Single-Entry Accounting System
Over double-entry accounting, single-entry
accounting has the significant advantage of
simplicity. Even those with little or no
background in finance or accounting can
understand single-entry records and reports.
Small businesses can use single-entry systems
without hiring an accountant west Los
Angeles. This approach does not require
complicated accounting software. By using a
simple spreadsheet or written notebook, firms can
easily create and maintain a single-entry system.
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