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07 Single Entry System of Accounting

Single entry system of accounting is on of the easiest methods of preparing financial statements. This presentation discuss the various aspects of Single Entry System of Accounting

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07 Single Entry System of Accounting

  1. 1. SINGLE ENTRY SYSTEM OF ACCOUNTING Noushad P.K Department of Commerce, Irshadiya College of Commerce and Social Sciences, Feroke, Calicut
  2. 2. INTRODUCTION It is not necessary to a small business to maintain books of accounts under double entry system They are usually happy with the minimum information Thus, they are adopting a different method which is came to known as single entry system of accounting
  3. 3. MEANING It is also known as incomplete accounting system An accounting system which is not based on double entry system is known as single entry system of accounting Such system maintains only personal accounts and cash book Expenses and incomes are reflected in the cash book, where as personal accounts reflects the position of debtors and creditors It usually follows cash basis of accounting
  4. 4. FEATURES Maintained by small business organisations Maintenance of cash book Only personal accounts are kept Collection of information from original documents Lack of uniformity Difficulty in preparation of final accounts
  5. 5. SINGLE ENTRY V/S DOUBLE ENTRY  Both debit and credit aspects of all transactions are recorded  Various subsidiary books are maintained  Ledger contains personal, real and nominal accounts  Preparation Trial Balance is possible  Trial Balance, Profit/Loss A/c and Balance Sheet are prepared in a scientific manner  It is a mixture of double entry, one entry and no entry  No subsidiary books, except cash book is maintained  Ledger contains personal accounts only  Preparation Trial Balance is not possible  Only rough estimates of profit or loss statement of affairs is made Double Entry System Single Entry System
  6. 6. ADVANTAGES Quick and easy to maintain Does not require employing a qualified accountant Extremely useful for small business organisations Economical
  7. 7. DISADVANTAGES Trial balance cannot be prepared Arithmetical accuracy cannot be guaranteed Incomplete and unrealistic result of trading Not possible to prepare balance sheet Difficult to detect errors and fraud Improper valuation of assets and liabilities Chance for mixing business and personal transactions of owners External agencies cannot use financial information