Limitations of Double Entry System

Limitations of Double Entry System

Limitations of double entry system can be explained in terms of high cost, limited scale operation, technical job, not error free.

1.    High Cost Option

First limitation of double entry system is its high cost. Double entry system involves number of cost i.e. cost of experience manager, cost of accounting software, stationary cost etc. Thus this system is not recommended /feasible for small businesses.

2.    Does not Suit Small Scale Organization

Double entry system does not suit to a limited operation, because it involves a lot of costs, and small scale organization cannot afford such system. Thus double entry system on one side is a basic requirement for both small and large organization, However , only large organization can afford this system.

3.    Complex System

Third limitation of double entry system is its complexity. Double entry system can only be handled by an experience manager; otherwise, it can produce horrible results. An experienced and technical sound accountant would be required to maintain the the double entry system.

4.    Not Error Free

Double entry system cannot be considered a 100% error free option. There are number of mistakes which cannot be detected by the double entry system. This system can only detect single impact mistakes (which effect one side of trial balance).