In this article we will discuss about the important features of double account system of accounting.
1. Generally, a public utility undertaking needs a large amount of capital which is invested in the acquisition of fixed assets. Therefore, fixed assets, fixed liabilities, current assets and current liabilities are to be separately dealt with. Fixed Assets and Fixed or Long-term Liabilities are recorded in the Receipts and Expenditure on Capital Account. Similarly, Current Assets and Current Liabilities are recorded in the General Balance Sheet.
2. It is not a system of maintaining account, but only a system of presenting the final accounts.
3. It is generally adopted by public utility concerns formed under special Acts of Parliament.
4. Annual Accounts, that is, Final Accounts, consist of:
(a) Revenue Account;
(b) Net Revenue Account;
(c) Receipts and Expenditure on Capital Account; and
(d) General Balance Sheet.
5. Public utility concerns are not expected to aim at profit. So, Revenue Account is prepared instead of Profit and Loss Account.
6. Similarly, Net Revenue Account is prepared instead of Profit and Loss Appropriation Account.
7. As stated above, the Balance Sheet is bifurcated into two parts – Receipts and Expenditure on Capital Account and General Balance Sheet.
8. It has already been stated that depreciation is not deducted from the asset concerned but the same is shown as a liability by way of fund; as such, Fixed Assets are recorded at book value.
9. General Reserve, Investment Fluctuation Reserve and other reserves are shown in the General Balance Sheet on the liability side.
10. The conventional Balance Sheet is intended to reflect a true view of the financial position of a concern as at a particular date. However, the double account form of Balance Sheet is intended to show fixed capital investment, and the source from which the amount is raised.