What is the Difference Between Double Entry System and Double Account System?
🆚 Go to Comparative Table 🆚The double entry system and the double account system are two different accounting methods that serve different purposes. Here are the main differences between the two:
- Objective: The double entry system is used to maintain accounts for businesses worldwide, while the double account system was developed specifically for public utility firms to present financial information more clearly to the public.
- Preparation of Annual Accounts: In the double entry system, businesses prepare their accounts to consist of Profit and Loss accounts and Balance Sheets. In contrast, the double account system divides the balance sheet into two parts: Capital and Net Revenue.
- Interest: 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.
- Scope: The double entry system is widely used and accepted around the world, while the double account system is limited to specific industries, such as public utility firms.
- Accounting Equation: The double entry system follows the accounting equation: Assets = Liabilities + Owners' Equity. In this system, transactions are recorded in terms of debits and credits, ensuring that the books are always balanced. The double account system, on the other hand, focuses on presenting financial information in a clear and organized manner, particularly for public utility firms.
In summary, the double entry system is a comprehensive accounting method used by various businesses to maintain their accounts, while the double account system is a more specialized method developed for public utility firms to present their financial information transparently.
Comparative Table: Double Entry System vs Double Account System
The double entry system and the double account system are two different accounting methods. Here is a table highlighting the differences between them:
| Feature | Double Entry System | Double Account System |
|---|---|---|
| Origin | Developed in the mercantile period of Europe to help rationalize financial transactions | Developed specifically for public utility firms that spent a large sum of capital on infrastructure |
| Purpose | Used and accepted worldwide for maintaining the books of many corporations | Used specifically for public utility firms |
| Equation | Assets = Liabilities + Equity | Not applicable, as it is not based on an equation |
| Recording | Records each transaction twice, as corresponding debits and credits | Divides its balance sheet into two sections: the capital account and general balance sheet |
| Error-checking | Requires that debits and credits always equal each other, allowing for error-checking | No error-checking mechanism, as it does not involve debits and credits |
In summary, the double entry system is a widely used accounting method that records each transaction twice, as corresponding debits and credits, to satisfy the accounting equation Assets = Liabilities + Equity. On the other hand, the double account system is a less common method used specifically for public utility firms, dividing the balance sheet into two sections: the capital account and general balance sheet.
- Double Entry vs Single Entry
- Bookkeeping vs Accounting
- Cash Accounting vs Accrual Accounting
- Balance Sheet vs Trial Balance
- Capital Account vs Current Account
- Nominal Account vs Real Account
- Dual vs Double
- Accounts Payable vs Accounts Receivable
- Method vs System
- Debit Balance vs Credit Balance
- Bank Balance Sheet vs Company Balance Sheet
- Financial Accounting vs Cost Accounting
- Accounting vs Auditing
- Current Account vs Saving Account
- Cash vs Accrual (Accounting)
- T Account vs Ledger
- Accounting vs Finance
- Debit vs Credit
- Costing vs Cost Accounting