single entry system?

A single-entry bookkeeping system or single-entry accounting system is a method of bookkeeping relying on a

one sidedaccounting entry to maintain financial information. Most businesses maintain a record of all

transactions based on the double-entry bookkeeping system. However, many small, simple
businesses maintain only a single-entry system that records the "bare-essentials." In some cases
only records of cash, accounts receivable, accounts payable and taxes paid may be maintained.
This type of accounting system with additional information can typically be compiled into an income
statement and statement of affairs by a professional accountant. Single entry system is an
incomplete form of recording financial transactions. It is the system, which does not record two
aspects or accounts of all the financial transactions. It is the system, which has no fixed set of rules
to record the financial transactions of the business. 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 management. 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.

Methodology : Accounting System1: Single Entry Accounting System:

A single-entry bookkeeping system or single-entry accounting system is a method of bookkeeping
relying on a one sided accounting entry to maintain financial information, based on the income
statement (profit or loss statement). The system records the flow of income and expenses through
the use of, daily summary of cash receipts and disbursements. The single-entry bookkeeping
method records entries once and does not "balance" the transaction out by recording an opposing
credit or debit.

A single-entry system may consist only of transactions posted in a notebook, daybook, or journal.
However, it may include a complete set of journals and a ledger providing accounts for all important
items. A single-entry system for a small business might include a business checkbook, check
disbursements journal or register, daily/monthly summaries of cash receipts, a depreciation
schedule, employee wages records, and ledgers showing debtor and creditor balances."
Under the method the intent is to record the bare-essential transactions. In some cases only records
of cash, accounts receivable, accounts payable and taxes paid may be maintained. Records of
assets, inventory, expenses, revenues and other elements usually considered essential in an
accounting system may not be kept, except in memorandum form. Single-entry systems are usually
inadequate except where operations are especially simple and the volume of activity is low. Singleentry systems are used in the interest of simplicity. They are usually less expensive to maintain than
double-entry systems.- Learn more at www.technofunc.com. Your online source for free professional
tutorials.

Detail Report :
The most significant problems associated with a single entry system include:

Assets. Assets are not tracked, so it is easier for them to be lost or stolen.

Audited financial statements. It is impossible to obtain an audit opinion on the financial

results of a business using a single entry system; the information must be converted to a double
entry format for an audit to even be a possibility.

Errors. It is much easier to make clerical errors in a single entry system, as opposed to the
double entry system, where separate entries to different accounts must match.

Liabilities. Liabilities are not tracked, so you need a separate system for determining when
they are due for payment, and in what amounts.

Reporting. There is much less information available upon which to construct the financial
position of a business, so management may not be fully aware of the performance of the business.
Single entry systems are strictly use for manual accounting systems, since all computerized systems
utilize the double entry system instead.
It is generally possible for a trained accountant to reconstruct a double entry-based set of accounts
from single entry accounting records, though the time required may be substantial. By doing so, you
can then reconstruct the balance sheet and statement of cash flows.

Advantages[edit]
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Single-entry systems are used in the interest of simplicity. They are usually less expensive to maintain than doubleentry systems which require a significantly larger amount of expertise. If a double-entry system is needed, then the
services of a trained person are often required.
According to the U.S.A. Internal Revenue Service:[1] "A single-entry system is based on the income statement (profit
or loss statement). It can be a simple and practical system if you are starting a small business. The system records
the flow of income and expenses through the use of:
1. A daily summary of cash receipts
2. Monthly summaries of cash receipts and disbursements."
Additionally, in the U.S.A. Internal Revenue Manual,[2] it is stated:
1. The single entry system of record keeping does not include equal debits and credits to the balance sheet
and income statement accounts. A single-entry accounting system is not self-balancing. Mathematical
errors in the account totals are thus common. Reconciliation of the books and records to the return is an
important audit step.
2. A single-entry system may consist only of transactions posted in a notebook, daybook, or journal. However,
it may include a complete set of journals and a ledger providing accounts for all important items.
3. A single-entry system for a small business might include a business checkbook, check disbursements
journal or register, daily/monthly summaries of cash receipts, a depreciation schedule, employee wages
records, and ledgers showing debtor and creditor balances.

Disadvantages[edit]
1. Data may not be available to management for effectively planning and controlling the business.
2. Lack of systematic and precise bookkeeping may lead to inefficient administration and reduced control over
the affairs of the business.
3. Single-entry record administration of those assets may occur.
4. Theft and other losses are less likely to be detected.

Analysis of Data
Single entry accounting system can be described as a system that businesses use to get by rather than something that
companies may find desirable.

Small Firms
Single entry system is used by small firms that have just started business. Such firms do not have the resources that are required to
put up a full-fledged accounting system in place. Hence they begin with a single entry accounting system. However as and when
their business grows most firms are compelled to adopt the double entry system. This is because the single entry system is highly
inefficient and can be used only by sole proprietors when the scale of business is very small and the transactions to be undertaken
are not very complicated.

Incomplete Records
The biggest problem with single entry bookkeeping system is that of incomplete records. Single entry system records only
transactions that the firm is undertaking with external parties. There are numerous transactions within the firm that are of vital
importance and need a place in the financial statements. However, the single entry system ignores these needs and gives
incomplete information to the management.

No Reconciliation
Single entry accounting system does not have provisions for reconciliation of accounts. This means that the system does not have
inbuilt error detection. Therefore, if a clerk is doing the task of making entries in the book, the system may be prone to clerical
errors. This could lead to management having insufficient information or no information when they have to make decisions.

Possibility of Fraud
Single entry accounting system is highly prone to frauds and embezzlement. There is only one book of account rather than an
elaborate accounting system. Hence, the internal checks are few. In fact they are non-existent. The person making the accounts
could single handedly manipulate the books of accounts and misappropriate the resources of the firm.
To counter this problem, Luca Pacioli and other merchants of Venice created the double entry accounting system. This system
proved to be very effective and useful and soon became the gold standard for the industry.
There are various different single entry system problems associated with accounting system they are: Tracking of assets are not
done effectively. It is likely to be lost or stolen without any knowledge. It is impossible to conduct financial audits for single entry
bookkeeping method. Information has to be initially converted into double-entry system for financial auditing purpose. It is likely that
errors and omissions may occur in single entry system. Otherwise in double accounting system, all the different accounts first have
to be matched before taking preparing balance sheet which makes double accounting system error free. There is no provision to
track the liabilities under single accounting system. One has to maintain books separately to keep records of payment dues. Single
entry system lacks with complete financial data due to which business management does not have sufficient information or clear
picture to take right action at right time. Now a days, all the computerized accounting systems are built based on double entry
bookkeeping method. Single bookkeeping methods are only used by small and newly start-up businesses. Accounting professionals
are expert in converting single entry accounting into double entry accounting. At the same time it is time consuming to restructure
and reconstruct all the statements and reports again. If you are using single entry accounting system and planning to switch to
other method, It is highly recommendable to switch to double entry system at the start of accounting year rather than converting at
the later stage.

Conclusion
Under the double entry system of book-keeping, both aspects of every transaction are
recorded, i.e. one on the debit side and the other on the credit side. Under the single entry
system of bookkeeping, both aspects of every transaction are not recorded in the books of
accounts. Under this system, the personal accounts of the debtors and creditors are
maintained. The usual subsidiary books maintained under the double entry system of bookkeeping are also maintained under the single entry system, but the postings are made from
these subsidiary books of those entries which affect personal accounts. Real and nominal
accounts are not maintained under this system. Since only one aspect of every transaction is
usually recorded under this system, therefore, the system 1s called 'single entry system'. It
should be noted that single entry system is not any particular system of book-keeping, but
rather the double entry system in an incomplete and disjointed form.

Suggestions
Most of financial accounting is based on double-entry bookkeeping. To
understand and appreciate the advantages of double entry, it is worthwhile to
examine the simpler single-entry bookkeeping system. In its most basic
form, a single-entry system is similar to a checkbook register and is
characterized by the fact that there is only a single line entered in the journal
for each transaction. In a simple checkbook, each transaction is recorded in
one column of an account as either a positive or a negative amount in order to
represent the receipt or disbursement of cash. While extremely simple,
because the above system uses a single column, only the difference between
revenues and expenses is totaled - not the individual values of each. Knowing
the individual total amounts of revenues and expenses is important to a
business, for example, when formulating a budget. The revenues and
expenses also are reported in the income statement. In the above example,
the individual revenue and expense amounts can be determined only by
sorting through the transactions and tabulating the revenue and expense
totals.

Discussion

there exists no system like single entry system. Broadly speaking, it is a defective
double entry system. Any system that falls short of complete double entry method
is called single entry system. Under this method, sometimes both the aspects of
transactions are recorded, sometimes only one aspect is recorded or sometime no
aspects of transactions is recorded in the books. As a general rule under the single
entry practice only the personal aspects of the transactions are recorded and the
nominal and real aspects are omitted altogether. As the name implies, the single
entry system does not take into account the double affect of every transaction. The
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ledger contains only the personal accounts of debtors and creditors, all impersonal
accounts such as purchases, sales, wages, carriage, rent etc., are not recorded.
Thus the system does not consider the two fold aspect of every transaction. In short
single entry system may be called a mix of double entry, single entry and no entry.
Single entry system may be defined as a system which does not strictly conform to
the double entry system of bookkeeping. Under this system what is found in
practice is an intermixture of single entry, double entry and no entry.

References
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