Single Entry Versus Double Entry System of Bookkeeping:
What is the difference between
single entry system and double entry system of bookkeeping?
What are the advantages of
double entry system over the single entry system of bookkeeping.
Single entry system of
bookkeeping which does not follow double entry system and as such, does
not record or give effect to the two fold aspect of each and every
transaction. Under this system of book keeping, generally a cash book
and books to record personal accounts are only maintained. It is not
really a system because under this system there may be no record of the
some of the transactions and only partial record of some others. As
such, single entry system of book-keeping is not perfect and frauds and
mistakes can hardly be detected. This system is discussed in greater
detail on Single Entry System Page. Proper results cannot be obtained by
Advantages of Double Entry Over Single Entry System:
- In double entry system of bookkeeping as
two fold aspect of each transaction is recorded in the books, a trial
balance can be prepared to prove the arithmetical accuracy of the
transaction. No trial balance can be prepared under single entry system
and hence accuracy of books cannot be proved.
- In double entry system the risk of fraud
or its non discovery is less. But under single entry system chances of
fraud or mistake remaining undetected are very high.
- In double entry system a trading and
profit and loss account can be prepared very easily. The proprietor can
know the profit earned or loss suffered by has business. Under single
entry system no trading and profit and loss account can be prepared
scientifically and, hence, the proprietor will have no firm idea of profit
earned or loss suffered.
- In double entry system a balance sheet
can be prepared from the books of accounts. The correctness of assets and
liabilities can be proved. The balance sheet called statement of affairs
in a single entry system is prepared in an unsatisfactory manner. The
assets and liabilities are not proved from records. Hence the correctness
of assets and liabilities cannot be relied upon.