Introduction

A single entry system records a transaction with a

single entry and only maintains one side of every

transaction. It is the oldest method of recording

financial transactions and is less popular than

the double entry system and is mainly used for

entries recorded in the income statement. This term

is used to describe the problems associated with the

accounts from an incomplete transaction and is

popularly called as ‘Preparation of accounts from

incomplete records’.

The core information involves cash receipts and

cash disbursements rather than asset and liability

records. The primary form is the cash book which is

an expanded form of the check register. This mainly

has columns which record particular sources and

uses of cash, and starts with the opening balance

and ends with closing balance. The single entry

system is mainly used in the manual process of

accounting and by small firms who do not have the

financial capability and resources that are necessary

for a full-fledged accounting system. Mainly all the

computerized accounting systems use double entry

accounting

Example Format of a Single Entry System Accounting

Book
Below is the example format of single entry system of

accounting.

This is an inaccurate and unscientific way of recording

transactions where there is no linkage among the

transactions or the available information. There is no

record of real and personal accounts and the cash book

mixes up the business and personal transactions.

Types of Single Entry System

of Single Entry Accounting System

#1 – Pure Single Entry
In this, no information is available of sales, purchases and

cash and bank balances only personal accounts are

considered. This method cannot be used in the practical

world since it does not provide any information regarding

cash or the daily transactions

#2 – Simple Single Entry

This account is kept on the basis of double entry system

but only two accounts are considered, i.e the personal and

the cash account. Entries are made only from these

accounts and no other account is considered

#3 – Quasi Single Entry

In this type of accounting apart from the personal and

cash accounts, other subsidiary accounts are also

maintained. The main ones being sales, purchases

accounts, and bill books. Discounts are also recorded in

the personal account. Other vital information like wages,

rent, salaries is also available. This method is adopted as

a substitute to double entry accounting systemOn a whole,

by looking at the types we can determine that the single

entry accounting system can be defined as the system

which is a mixture of Single-entry double entry and no

entry

Advantages of using Single Entry System

Advantages of using Single Entry System Accounting

 It is comparatively simple and easy to implement

 No professionals are required, resources with a basic

understanding of accounting or business can perform

single entry system

 This type of accounting suits small firms which are at

starting stage and startups

Income and expense are accounted on a daily basis

  Only limited accounts are opened since all the

transactions related to personal account are recorded

relating in personal and real accounts

 As mentioned in the previous point, that limited

accounts are opened and the books are limited,

expenses to maintain these accounts are also limited

 The single entry system is purely based on the

income statement hence, it becomes easier to

determine the profit and loss

Disadvantages Of Single Entry System

Major drawbacks or disadvantages of single entry
system of bookkeeping can be expressed as follows:

1. Incomplete System Of Accounting

Single entry system ignores dual aspects (debit and

credit) of transactions. It also ignores nominal
account and real accounts. So, it is an incomplete
system of recording transactions.

2. Unsystematic And Unscientific System

Single entry system does not follow proper

accounting rules and principles to record the
financial transactions. So, it is unsystematic and
unscientific system of recording transactions which
cannot be taken as authentic source.

3. No True Profit Or Loss

Trial balance, trading account and profit and loss

account cannot be prepared with the help of single
entry system. So, correct profit or loss amount
cannot be obtained in the absence of these account.

4. No True Financial Position

Balance sheet cannot be prepared with the help of
single entry system because it ignores real accounts.
So, true financial position of the firm cannot be
revealed in the absence of balance sheet.

5. No Arithmetical Accuracy

This system ignores debit and credit principles of

accounting. So, the trial balance cannot be prepared
with only one aspect of transaction. Therefore,
arithmetical accuracy is not possible in the absence
of trial balance.

6. Unacceptable To Tax Authorities

Because of incompleteness, unscientific and lack of

accuracy, tax authorities and other business
agencies do not rely on single entry system.
7. Chance Of Fraud And Errors

There is very high chance of occurrence of frauds

and errors under single entry system because of lack
of proper internal check system.

8. Unsuitable For Planning And Control

Single entry system does not provide accurate and

adequate information to the management. So, it
does not support top level management for future
planning and effective control.

9. Not Suitable For Large Business Firms

Single entry system is not suitable for large business

firms having large number of financial transactions
Please note that Profits under this system can only be an
estimate and therefore cannot necessarily be true and
correct
#1 – Assets

In terms of keeping recording or tracking, single

entry system does not track assets. Thus, it

makes it easier for them to be lost or stolen

#2 – Audited Statements
The double entry system is necessary

for auditing financial statements, necessary for

checks and balances of such account. It is

impossible to audit statements in a single entry

system. Even if one wants to do it they will have

to convert the single entry to double entries and

balance it for auditing

#3 – Increased Risk of Errors
In this system, there is no check for other

account and cannot be balanced. This makes it

more difficult to keep a check or find missing

entries and track errors

#4 – Performance Analysis
Financial position cannot be determined since

there is no proper balance sheet maintained

and also due to the limited information. It makes

it difficult for the management to analyze its

performance and estimate future metrics

#5 – Incomplete Records
This system only focuses mainly only on those

transactions which involve business or

transactions with external parties and ignores

the other vital transactions that may be

necessary to determine the financial position of

the company and should have a place in the

financial statements

#6 – Accuracy
Arithmetical accuracy cannot be achieved since

this system does not prepare a trial balance

The Major Differences in Single Entry Accounting
and Double Entry Accounting System
 Single entry system can be defined as a system

where only one aspect of each transaction is

maintained i.e either debit or credit, on the

contrary in double method accounting system

both these transactions are recorded and all the

aspects of every transaction are

 Single entry transaction is simple and does not

require detailed knowledge in accounts whereas

double entry transaction requires expertise

 Incomplete records are maintained in single

entry system while double entry captures both

the sides and records

 Single entry system maintains cash

accounts and personal accounts while double

entry system maintains all kind of account ie

real, nominal and personal

 Since small firms do not have the financial

capabilities and resources single entry

accounting is suitable on the contrary for large

firms it is necessary to have a double entry

accounting system

 Frauds and errors are easier to identify in double

entry accounting system than in single entry

system

 As compared with the double entry system,

single entry system has no standardization and

there is no uniformity between the different

businesses following the same method. Each

business maintains accounts as per its

convenience and requirements.

Features Of Single Entry System
The main characteristics or features of
single entry bookkeeping system can be
highlighted as follows:

1. Lacks Fixed Rules And Principles

Single entry system is not maintained on the
basis of fixed rules and principles. So, it lacks
accounting principles and rules.

2. Incomplete Accounting System

Single entry system of bookkeeping ignores dual
aspects of business transactions. So, it is
incomplete system of accounting.
3. Lacks Arithmetical Accuracy
Single entry system does not help to prepared
trial balance. So, arithmetical accuracy is not
possible.
4. No Final Accounts

Final accounts (trading account and profit and

loss account) and balance sheet cannot be
prepared with the help of single entry
bookkeeping.

5. No True Profit Or Loss

Actual profit or loss of the business cannot be

known because profit and loss is not prepared
in this system of accounting.

6. No Disclosure Of Financial Position

Balance sheet cannot be prepared on the basis

of single entry system. So, financial position of
the business cannot be ascertained.
7. Suitable For Small Business Firms
It is suitable for small business firms having
small volume of business transactions.
Especially sole proprietorship and partnership
firms prefer single entry system.

8. Economical System
Single entry system is the most economical and
time saving method of recording financial
transactions of the firm.
Limitations of Single Entry system
It is an unscientific method of keeping business records
because it does not follow the duality concepts (meaning
that every transaction affects two sides). Profit or loss
ascertained and reported are simply estimates, which
cannot be considered as actual and accurate, because of
not maintaining real and nominal accounts.

Moreover, it is not easy to detect frauds and errors (if any).

The firm may also face difficulties in raising loans because
the banks and financial institutions cannot rely on financial
information provided by the entity. Due to this very reason,
this method is not adopted by companies, and they have
to maintain their books of accounts as per the Companies
Act.