In general terms, The double entry system is a method of accounting that is widely used and approved around the world. The double account system, on the other hand, was created for public utility companies that spent a significant amount of money on fixed assets. The double entry system is entirely different from the double account system. One should not confuse these two – Double entry system and Double account system.
What is the Double entry system?
Every business transaction must be documented in at least two accounts, according to the double-entry accounting or bookkeeping system. Double entry system is also known as the dual entry system. The double-entry system further stipulates that the amounts entered as debits must equal the amounts entered as credits for all transactions.
What is a Double account system?
A double account system is a method of presenting the annual final accounts/annual financial statements of public utility undertakings, like electricity, railways, gas, tramways, etc. These businesses are frequently formed under special acts, and as a result, the accounting format is dictated by statute.
Except for electric supply companies and tramways, these public utility concerns are normally run by the government or municipal governments.
It’s worth noting that, with the exception of railways and electricity, industrial enterprises’ accounts are prepared in accordance with the Indian Companies Act, 1956.
The goal of this technique is to reveal how capital is raised and applied in the acquisition of various fixed assets, rather than to illustrate the financial position at a specific point in time.
Difference between Double entry system and Double account system
The following are the differences between the double entry system and double account system.
|Double entry system||Double account system|
|The objective of preparing the balance sheet under the double-entry system is to disclose the financial position of the business on a particular date.||The main objective of preparing the balance sheet under double account system is in two parts and prepares the balance sheet to give the details regarding the fixed capital raised and its utilization in purchasing fixed assets|
|2. Preparation of annual accounts|
|Here business concerns prepare their accounts to consist of Profit and loss account Profit and loss appropriation account Balance sheet||Under double account system, the public utility concerns prepare their annual accounts to consist of Revenue account Net revenue account Receipts and expenditure on capital account General balance sheet|
|3. Record of accounts|
|Under the double-entry system, fixed assets and fixed liabilities are recorded in the balance sheet.||Under the double account system, fixed assets and fixed liabilities are recorded in the capital account.|
|4. Deduction of depreciation|
|Depreciation is deducted from the concerned asset in the balance sheet.||The fixed assets are shown at their cost in the capital account. The depreciation fund is shown in the general balance sheet.|
|5. Parts of balance sheet|
|In the double-entry system, only one balance sheet is prepared to present the financial position of the concern on a particular date.||In a double account system, the balance sheet is prepared in two parts i.e; capital account and general balance sheet|
|In the double-entry system, interest appears in the profit and loss accounts.||In the double account system interest is taken to the net revenue account.|
As a result of the preceding discussion, it is clearly seen there are differences between double entry system and double account system. Although the double entry method is used for the maintenance of accounts, the double account system has only been used to present clearly accounts, particularly to demonstrate to the public clearly how the money they received was spent on fixed assets.
Further related readings:
- Difference Between Single entry system and Double entry system
- Difference Between Book keeping and Accounting