Answer to Question #79334 in Finance for Hugh Heron
An important element within financial accounting is the ability to prepare financial statements and reports. Double-entry accounting allows accounting departments to prepare financial statements easily.
Includes Assets and Liabilities
In contrast to single-entry accounting, double-entry accounting allows for the recording of assets and liabilities. In single-entry accounting, individuals record transactions as either a revenue or expense. Double-entry accounting takes advantage of the accounting equation in which assets equal liabilities plus shareholders’ equity.
One advantage of using double entry accounting is that it provides checks and balances, which prevent fraudulent activity and reduces errors. Double-entry accounting prevents fraud in a greater way than single-entry accounting because it makes it difficult to manipulate accounts. You can easily detect account manipulation by examining the journal entries and comparing them to previous journal entries for the same or similar transactions. Both sides of the accounting equation must balance.
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