Definition and Explanation of Single Entry System:
Define and explain single entry system of bookkeeping.
What are limitations of single entry system of accounting
It is difficult to define single entry system because, in fact, 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 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.
Defects/Limitations/Disadvantages of Single Entry System:
The limitations or defects or disadvantages of single entry system may be summed up as follows:
Under this system only partial and incomplete record is maintained because two fold aspects of transactions are generally ignored.
As the two fold aspects of every transaction are not recorded, a trial balance cannot be drawn up to test the arithmetical accuracy of the records.
A nominal accounts are not maintained, a profit and loss account cannot be prepared for want of information regarding the various income and expenditures.
As no real accounts are maintained the preparation of balance sheet is not possible.
You may also be interested in other articles from “single entry system” chapter:
- Definition and Explanation of Single Entry System
- Defects/Limitations/Disadvantages of Single Entry System
- Statement of Affairs – First Method
- Difference Between Statement of Affairs and Balance Sheet
- Conversion into Double Entry System