Single Entry System
Single entry system or single entry bookkeeping is an accounting method which relies on one side accounting. Though double entry is common among business houses, single entry is a bare essential and very important for small business houses. While few of these single entries would hold only information regarding cash, accounts receivable, accounts payable and taxes while information regarding assets, inventory, expenses and revenues are not recorded. Such non recorded information is preserved in the form of memorandums. Such information is used in income statements and balance sheets.
Simplicity of Single Entry
Single entry is simple and maintained with the least expense since it could be done with the help of an untrained person. However the data would not be useful for the management to control and plan the business. While detecting errors is easy in double entry, single entry does not alert the clerk’s errors. Single entry does not exist in reality and refers to defective accounting that falls short of accurate double entry system. Revenues and expenses could be showed in a single column of rows or in two columns in single entry. Additional columns may be added to classify revenues and expenses.
Drawbacks of Single Entry
Single entry has the drawback of lacking the ability to track assets and liabilities. The link between income and balance sheet is not provided here. Single entry systems are a part of double entry systems that are disjointed. While current profit cannot be analyzed through single bookkeeping, net profit could be analyzed. Single entry system helps to prepare statement of affairs. The incomplete information in single entry might include few matters and omit others.
Circumstances of single entry and its objectives
Single entry is recorded when advance payments are done and helpful during the return of goods. Single entry records the debit and credit of a transaction. It is a personal and nominal account of the transactions. It is useful in the preparation of trial balance. Since there are no options for checking, single entry is susceptible to frauds. Since it is economical, small traders benefit from this system. People, who find it difficult to operate double entry system, could adopt Single entry systems for easy accounting. The position of the business could be easily identified at times of property loss and loss pertaining to stock or book of accounts. Single entry bookkeeping is very useful during unforeseen events. It is very useful in preparing profit and loss account.