A single entry accounting system in accounting process is a way of bookkeeping counting on a one sided financial entry to maintain accounting information. Single-entry systems are used in the interest of simplicity. They are usually less expensive to maintain than double-entry systems which require a significantly larger amount of expertise.
Single Entry Accounting System Basics
Single entry system is an incomplete form of encording financial transactions in the books accounts. It is the system, which does not record two aspects or accounts of all the financial transactions. Under this system there is no set or rules are prescribed for recording financial transactions. Single entry system records only one aspect of transaction. Thus, single entry system is not a proper system of recording financial transactions, which fails to present complete information required by the entity. Single entry system mainly maintains cash book and personal accounts of debtors and creditors. Single entry system ignores nominal account and real account except cash account. Hence, it is incomplete form of double entry system, which fails to disclose true profit or loss and financial position of a business organization. It is not a reliable system but it is still used by small organizations to keep the records of transactions.
– Single entry system maintains only accounts relating to person but it ignores the other types of accounts i.e., real and nominal accounts.
– As per this system, the cash book is prepared but both personal and business cash transactions are recorded in the same book.
– It is suitable to small traders having fewer numbers and having lesser number of transactions.
– It lacks the specific rules of maintaining books of accounts as a result there is no uniformity in accounts of different firms.
– Trial balance cannot be prepared under this system.
– The profit or loss calculated under this system is not actual amount.
A system of tracking business income and expenses that requires each item of income or expense to be recorded just once. It does not gives any true picture of financial position of the business entity. Single-entry accounting system of bookkeeping requires inputting the entry only one side in either the credit side or the debit side. This method is most commonly used for small businesses and those only records the important financial information like such as cash, accounts receivable, accounts payable or supplier details of payments, etc.
This system is type of system is considered as inadequate unless the business transactions are very simple and the volume is very low level. Single-entry requires the person keep a single journal or book where all the debit and credit are allocated. Single-entry system is beneficial for small business concern that does not have to worry much about assets, large number of employees, etc.
Single entry accounting system is very simple, low expensive, easier to understand, manage, easy to operate, provides general view of earnings and expenditure.
Originally posted 2013-10-29 06:40:15.