'Effectiveness of Double Entry Accounting System Essay\r'

'Giving examples, evaluate the effectiveness of the dates in the double entry dodge of story in ensuring the true statement of the vizors. As surface as examining the controls, your evaluation should consider errors that do non affect the balancing of the outpouring end. Double entry method of billhooking systeming system was invented in 15th century and lock up being in use until today, this is kinda an interesting fact; however it indicates that on that point is something about the system, thus making it so effective and irreplaceable.\r\nTo evaluate the effectiveness of the controls in the double entry system, we should first incredulity ourselves wherefore is double entry agree relieveing system is still being employ until today. Double entry carry keeping is very useful because it chiffonier help spotting a fold of errors that narrationants make every(prenominal) day.\r\nThe fact of the guinea pig is, that every transaction is being entered twice, whic h clear eliminate some of the errors, that otherwise could commence been missed out. For example, an accountant has debit entryed ? 1409 P. Vasiljev’s account instead of ? 490, however because he had to reference point the bank account as good, he come acrossed at the transaction again, and spotted the error. what is more this system helps us to sire errors exploitation trial counterbalance. As the trial balance entrust eventu anyy be produced, it impart identify whether or non, hit of debit ordain equal to assurance, if not, it indicates that errors has been do. Despite the fact, there ar errors that double entry accounting bequeath be unable to reveal, which will be shown below. (http://www. cannisterhamrogers. com, 2011) Complete Reversal of Entries A payment of ? 16 to V.\r\nPutin, a supplier, was debited in the cash book and credited to V. Putin’s account. Compensating computer error The bank account is down the stairs cast by ? 3000. The salaries account is overly chthonic casts by the same amount. misconduct of Omission The sale of products, ? 100 (plus VAT) to G. Bush, has been totally told omitted from the books. Error of Commission A bargain for of stock, ? 305 from D. Johnson was miss entered in J. Cena’s account. Error of Principle The purchase of a refreshing office table, ? 150, is debited by mistake to the purchases account instead of equipment account.\r\nError of Original meekness Rent of ? 96 paid by cash was entered in the both accounts as ? 69. Control Accounts A control account is a summary account in the normal daybook. The details that support the balance in the summary account ar contained in a subsidiary ledger †a ledger outside of the prevalent ledger. The purpose of the control account is to keep the superior oecumenical ledger unaffectionate of details, barely have the correct balance for the fiscal statements. For example, the Accounts receivable account in the ge neral ledger could be a control account.\r\nIf it were a control account, the company would just update the account with a some amounts, such as summate entreatys for the day, total sales on account for the day, total returns and allowances for the day, and so on The details on all(prenominal) customer and each transaction would not be recorded in the Accounts Receivable control account in the general ledger. Rather, these details of the accounts receivable activity will be in the Accounts Receivable ancillary Ledger. This works well because the employees working with the general ledger probably do not need to get wind the details for every sale or every collection transaction.\r\n moreover, the sales managing director and the credit manager will need to know circumstantial information on individual customers, including whether a customer recently reduced their account balance. The company can provide these individuals with approaching to the Accounts Receivable Subsidiar y Ledger and can keep the general ledger free of a tremendous amount of detail. (accountingcoach. com, 2011) relieve the importance of entire accounting records in meeting the needs of the caper and its stakeholders.\r\n news report is a very important pricking in order to keep overcome of quantifiable factors of the business. The accounts are often used to license the flow of the money within the governing. They are also made to tog up financial information of the business in order for it to be break upd to see how well the business is doing, how much it is worth, and how much wage it is making. 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 essential for the accounts to be accurate.\r\nFor the business it is important for the miscellaneous reasons. First of all the business wants to see how well it is doing every year, that includes it’s swinish and net profit, the w orth of its assets and liabilities, etc. The accuracy of this information is vital, as the brass section’s fartership can then analyse this information and make decisions according to the outcomes. irregular of all if the accounts are being produced faulty or incorrect, the organisation will almost likely make wrong decisions, which may lead it to the loss of money or even bankruptcy.\r\nSecondly 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 hire and salaries they have earned, this authority 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.\r\nIf the wages are overpaid, it meaning that the organisation has lost funds it shouldn’t have, whereas if they a re underpaid it may lead to serious mass such as legal claims. Investors Investors that formulate to invest funds into the organisation would look into accounts of the business in order to find whether it is profitable to put their money into the company. The accounts of the organisation will often be analysed, this means that the decision they make, will be parasitic on the accounts, which is why it is vital for them, that the accounts are accurate. Board o Directors\r\nBoard of directors, or the owner of the business, is analysing the accounts on the regular basis, whether it is monthly or annually. The decisions that the organisation is making regarding strategy, approach, etc. are dependent on the accounts. This is why it is critical that the accounts made are accurate, as if they aren’t wrong decision could be made, which may lead the company to colossal financial losses. Government As all the businesses accounts must be submitted to the government, usually annually, it means that government would need accounts to be accurate.\r\nThis is cod to the fact that government would need to look out over the accounts in order to see whether all the taxes are being paid, and that everything remains under the law. Suppliers After producing â€Å"T accounts” and making few errors myself, it is now clearly seen that suppliers want accurate accounts in order to receive expert amounts of money, once they’ve sold goods on credit to the company. If some of the entries within â€Å"T accounts” are entered inaccurately, the payment may be made to different supplier. Adding to that the business may underpay the supplier, which is not acceptable by any means.\r\n'