Materiality & Objectivity Concepts + Double vs Single Entry System | Class 11 Accountancy

Materiality & Objectivity Concepts + Systems of Accounting | Class 11 Accountancy Chapter 2

This guide completes the 13 basic accounting concepts from CBSE Class 11 Chapter 2 with the Materiality Concept and the Objectivity Concept, then moves on to the critically important topic of Systems of Accounting — the Double Entry System and the Single Entry System.

Understanding these concepts gives you a complete picture of the theoretical and practical framework that governs financial recordkeeping.

2. Objectivity Concept

Keeping Accounting Free from Bias

The Objectivity Concept requires that accounting transactions must be recorded in an objective manner, free from the personal bias of accountants or any other person involved. Every entry must be supported by verifiable documentary evidence — a voucher, receipt, invoice, or delivery record that any independent party can examine and confirm.

What Counts as Valid Evidence?

• Cash purchases: Cash receipt acknowledging payment made
• Credit purchases: Copy of the purchase invoice and delivery challan
• Fixed asset acquisitions: Receipt or invoice for the amount paid to the supplier
• Expense payments: Receipts, utility bills, payroll records

These documents provide an objective, verifiable basis for every entry. Auditors, tax officers, and investors can review the supporting evidence and confirm that the transaction occurred and was correctly recorded.

The Link Between Objectivity and Historical Cost

The adoption of historical cost as the basis of recording assets is directly connected to the Objectivity Concept. The actual price paid for an asset on the date of purchase is verifiable from purchase documents — it is a matter of record, not opinion.

Market value, by contrast, is inherently subjective. It can vary between different valuers, between different locations, and between different points in time. Adopting market value would introduce personal judgment into the accounts, undermining objectivity and making records harder to verify or rely upon.

3. Systems of Accounting

Having covered all 13 basic accounting concepts, we now turn to the two systems by which financial transactions can be recorded in the books of accounts.

Double Entry System

The Double Entry System is grounded in the Dual Aspect Concept — the idea that every transaction produces two effects simultaneously. Under this system:

• Every transaction is recorded in at least two accounts
• One account is debited and another is credited
• The core principle: every debit must have a corresponding credit

Why Double Entry Is Preferred:

The Double Entry System is a complete system — both aspects of every transaction are captured in the records. This produces several important benefits:

• Arithmetical accuracy can be verified at any time by preparing a Trial Balance — if it does not balance, an error exists somewhere
• Fraud and misappropriation are minimised, because incomplete recording is detected more easily
• It supports the preparation of a proper Profit & Loss Account and Balance Sheet
• It is suitable for organisations of all sizes, from small sole proprietorships to large corporations

Single Entry System

The Single Entry System is, in essence, an incomplete system of maintaining financial records. It does not capture the two-fold effect of each transaction. Under this system, only two types of accounts are typically maintained:

• Personal accounts — records of individuals or companies the business deals with
• Cash book — records of cash received and paid

Real accounts (property and assets) and nominal accounts (income and expenses) are largely ignored. Some transactions are recorded from one side only; others are recorded from both. There is no consistency or uniformity.

Drawbacks of the Single Entry System:

• Records are incomplete and unsystematic
• Arithmetical accuracy cannot be easily verified
• Accurate profit figures cannot be reliably calculated
• Unsuitable for audit, statutory compliance, or access to formal credit
• Cannot produce a proper Balance Sheet

Despite these weaknesses, the Single Entry System remains popular among small business owners because it is simple, flexible, and requires no specialist accounting knowledge.

Quick Reference Summary

📌 Internal Linking Suggestions

• Previous: Full Disclosure, Consistency & Conservatism Concepts Explained
• Next: Cash Basis vs Accrual Basis and Accounting Standards — Class 11
• Related: Dual Aspect Concept and the Accounting Equation

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