Sources of Revenue: Broadcasting Rights
The consistent generation of revenue is important for the success of any sports league. If the organizers of any of these leagues have to spend a large amount of time and resources to collect revenues, then they will not be able to focus on organizing the game. This is where the broadcasting rights come into […]
Omnichannel Retailing and its Benefits
The past few years have witnessed the rise of online retail. As a result, there has been a persistent debate about whether or not brick-and-mortar stores have outlived their utility. There are many critics who believe that this may not be the case. Even though online retail has significant advantages, it still lags behind traditional […]
Why are Professional Sports Franchises Increasing in Value?
The sports business has traditionally not been a very lucrative one. It was common for the valuation of sports franchises to stay stagnant for a large number of years or even drop down as the years progressed. However, all this has changed drastically now. It is now common for sports team franchises to drastically go […]
Savings and Loan Crisis in the United States (1980’s)
The United States banking industry and the economy in general was rocked by the Savings and Loans crisis in the 1980’s. The savings and loans associations had been an important part of the United States banking system. Hence, when one out of every four savings and loans in the US went under water, the nation […]
What is Strategic Budgeting?
The budgeting process is an integral part of any business. The budgeting process is ubiquitous and underlies almost every decision in the corporate world. In fact, critics of the budgeting process argue that the process takes too much of the management’s time. The management typically spends 25% to 30% of four months of their time […]
The double entry system of bookkeeping is said to have revolutionized growth in modern business. It is only because businesses are able to keep track of their growing scale of transactions efficiently that they grow further. This has been facilitated by a well designed, error preventing accounting system called the double entry system. Here are more details about this system:
In a double entry bookkeeping system there are two sides to every transaction. The sides are equal in magnitude i.e. the debits must always equal the credits.
When a firm grows beyond a certain size it has to use double entry system of accounting. This is both because it is mandated by law as well as because it is the most efficient system.
Double entry accounting system keeps a record of all major accounting transactions. These could be transactions outside the firm with third parties. Or they could be intra firm transactions where raw material has now been converted to Work In Progress (WIP). By making sure every record about credit as well as intra firm transactions is being accounted for, double entry system provides the most accurate record.
As the scale of a business grows, it becomes more prone to clerical errors. A clerk accounting for a large number of transactions all day is bound to make some mistakes. However, the double entry system does not allow these mistakes to have a cascading effect. This is because the system is constantly checking whether total debits equal total credits. When they are not, accountants know they are dealing with an error. They can then find out the error, correct it and then move forward. This saves a lot of time and builds incredible accuracy in the system.
However the double entry accounting system is not 100% error proof. There is a possibility that an entry may have been completely omitted or that there may have been compensating errors done while passing the entry.
Just like reconciliation, when a business grows, more and more responsibilities need to be entrusted to workers. Many times this leads to frauds by the workers as they embezzle cash and make use of resources for personal benefits. However, the double entry accounting system, when used correctly prevents such situations from arising. The system has strong inbuilt controls to avoid misuse of any resources.
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An Overview of Contracts and Why They are Important to Business and Society
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