Accounting System (Single Entry System)

The practice of book-keeping with the invention of money in Lydia, Greece during 700 B.C. Different types of recording system were used for recording the financial transactions at that period. Due to increase in the volume of the financial transaction, the traditional type of accounting system became unable to fulfill the purpose of accounting. The new and modern accounting system gradually developed to maintain a systematic record of the financial transaction. The accounting system can be classified as below:

Single Entry system

Single entry system is that type of accounting system which has no fixed set of rules and principles for recording the financial transaction. It does not follow the basic principles of accounting. It does not consider the dual effect of all the transaction. This system only maintains cash and personal accounts but ignores real and nominal accounts. It prepares cash book and personal account of debtors and creditors. It has no any specific rules and principles for preparing the accounts. It is also known as accounting for incomplete records.The following are the main definitions of single entry system: Single entry system is a system of book- keeping in which, as a rule, the records of only cash and personal accounts are maintained. It is always incomplete double- entry system varying with circumstances.Single- entry system is a method employed for recording transactions, which ignores the two-fold aspects and consequently, fails to provide the business man with information necessary for him to be able to ascertain the position.

Features

1. Single entry system has no fixed set of rules for recording the transactions.
2. It has no fixed principles and rules for recording the transactions; therefore, there is a variation on its application from one another.
3. It maintains a personal account of all debtors and creditors.
4. It maintains cash book for recording cash receipts and payments.
5. It is incomplete because it does not record the transactions.

Advantages:

1. Single entry system is simple to understand and easy to maintain. Under it, no fixed rules and principles are followed to record the financial transactions.
2. It is economical. It does not require highly skilled manpower to maintain the accounts.
3. It is suitable to the small business organization having a limited number of financial transactions.
4. It determines the amount of profit easily. It makes a comparison between opening and closing capital to determine the amount of profit.

Disadvantages:

1. Single entry is an unscientific and unsystematic system because it does not follow any accounting rules and principles.
2. It does not help to check the arithmetical accuracy of the books of accounts.
3. It is an incomplete record which is not acceptable for the purpose of tax assessments.
4. It does not ascertain true profit or loss and financial position of the business.
5. It is an incomplete system of book-keeping. It does not consider the two aspects of all the financial transactions.