Single Entry Bookkeeping, Features of Single Entry
Single Entry bookkeeping is the oldest form of bookkeeping, where only one side of the transaction is entered in the books. It is also called incomplete record system. As a general accounting rule, every debited amount should also have credit effect too. In this system usually, cash book is maintained along with ledgers of parties.
Features of single entry system
- For small business: Used for the small business entity, like shopkeeper
- Books for recording: Maintained only two books that are cash book and parties ledger (Account Receivable & Account payable.
- Entity Concept: Under this system usually focus is on the transaction recording of owner irrespective of business or personal, here no concept of separate business entity.
- No Classification of Transaction: It is just recording the transaction irrespective as per classification or nature of entry (Here you could not understand the nature, its capital nature or revenue nature etc.).
- Non-accuracy of business worth: A rough estimate of profit is undertaken on the basis of the cash register, without having the analysis of ratio, entity worth and balance sheet, because of incomplete recording.
- No rules and regulation are followed in this system for each transaction recording.
Advantages of single entry system
- Time-saving only updates one or two books and does the other business work.
- Cost cutting. Here you need not hire an accountant. Simple two books can be updated easily. So that its cut your cost with no hiring a cleric and buying all books.
- Everyone can maintain it without getting any training for bookkeeping.
- Helpful for a small business entity to handle and manage it.
Single entry system problems
- Business is started for getting profit and growing worth. With this system, you are speechless about where is your business in that sense.
- Balance sheet could not prepare with the incomplete and improper classification of accounts.
- Tax and insurance also effects with this system. In case of any query or issue, you cannot provide a solid, technical and valid response. Tax, labour and insurance authorities also not rely on this system.
- Due to lack of classification, assets and expense cannot track.
- Debtors and creditors of the entity are not maintained properly.
- Auditing is the backbone of finance. It helps in fixing the errors, mistakes and frauds. But in this system, it is not possible to make an internal or external audit due to an incomplete record.
Single entry system example
- Cash book and chequebook is the main example of that system.