The accountancy is
divided into two types of systems. One is Single Entry System or Accounts of
Incomplete Records or Incomplete Double Entry System and another one is Double
Entry System.
Single
Entry System
It
is a unscientific, incomplete, inaccurate system of accountancy. Transactions
are recorded in non –dual aspect concept. Dual Aspect Concept is not followed
in single entry system. Transactions are recorded in diaries or some of notes
in single line. At the year ending, they are collectively segregated and
summerised in Statement of Affairs to find out the closing capital. A statement
of Profit or loss is prepared to derive profit or loss from closing capital.
Definition
According to Kohler,
“Single entry system is a system of bookkeeping in which as the rules, only
records of cash and personal accounts are maintained. It is always an
incomplete double entry varying with circumstances.”
Explanation
Single entry system is a system of art of
bookkeeping. All business transactions are recorded in the books of accounts.
In single entry system, only cash and
personal accounts are maintained and real and nominal accounts are not
maintained.
This system is a n incomplete double
entry system which is variable in nature.
Feathers
of single entry system
1) It is applicable for sole
proprietor and partnership
Single entry system is unscientific system and
incomplete double entry system. It cannot be applied to corporate sectors. It
is applicable to small level business which has small level of transactions
comparing to corporate sectors.
2) Cash and Personal
Accounts
Under single entry system, all transactions
are recorded and grouped under two accounts only. They are named as personal
accounts and cash accounts. Real account and nominal accounts are not existed
in this system but they are existed in double entry system. Only the cash
transactions and the credit transactions which are dealing with persons are
recorded in this system.
3) Transactions are not recorded
completely
Under single entry system, transactions are recorded
in diaries, similar notes as single line. As they are keeping these style of
bookkeeping, some transactions can be omitted and missed because insufficient
method of recording.
4) No Uniformity
As like double entry system, Single entry system
records all transactions in the books of accounts but it does not follow
uniformity in recording and classifying the transactions. No proper Journal or
subsidiary books are kept and no ledger accounts are maintained separately for
every class of accounts.
5) Dependent on source document
The transactions recorded in the books of
accounts in single entry system are not accurate and reliable. No proper books
of accounts are maintained. To check the reliability of transactions recorded
in the books of accounts, source documents of such transactions are to be
verified. The recorded data in books of accounts cannot be relied for accuracy
of transactions.
Limitations
of Single Entry System
1) Incomplete Records
Transactions are not recorded in dual aspect
concept. There is no equal amount of credit to every debit. Debit and Credit
are not existed in the system. The recording of transactions in this system is
incomplete, no equal debit to equal credit.
2) Financial position is not
ascertained
Statement of Affairs is prepared to find out the
closing balance of capital in the final accounts of single entry system. The
balancing figure obtained by comparing the all liabilities except capital with
all assets of a business is treated as closing capital of the business. Financial
position is not revealed accurately in this statement of affairs. Under double
entry system, Balance sheet is prepared in the final accounts. Balance sheet
tallies all assets with all liabilities exactly. The exact financial position
can be ascertained.
3) Performance of business is not
found
Under single entry system, statement of
profit or loss is prepared to know the profit or loss of a business. In
statement of profit, the profits are derived as a balancing figure resulted by
subtracting the opening capital from the closing capital and the drawings are
added with and additional capitals are subtracted from closing capital. The
profit is estimation but it is not exact result of the business. Under double
entry system, Trading and profit and loss account is prepared. All accrued
incomes are matched with the accrued expenses and the result is treated as
profit or loss of the business. The profit is ascertained more exactly.
4) No accuracy of accounts
Trial Balance cannot be prepared in single entry
system as it is not following dual aspect concept. No debit and credit is
treated in this accounts. So all debit accounts cannot be matched with all
credit accounts while preparing Trial Balance. The accuracy of accounts cannot
be found because trial balance is not prepared.
5) No comparison between two
accounting periods
Transactions recorded in single entry system is
inaccurate so it cannot be compared the transactions recorded between two
accounting periods. All transactions are not recorded genuinely so it is not
acceptable to compare the transactions between two accounting periods.
6) Unacceptable by tax
authorities
One cannot file his return of accounts by following
single entry system to the tax authorities. It is a unscientific method of
bookkeeping so it is not acceptable by tax authorizes.
7) Insufficient to detect frauds
If any frauds are committed in the books of
accounts, it cannot be found. An incomplete record of account does not provide
a platform to detect the frauds in the books of accounts. It is unscientific,
inaccurate so it is no possible to find the frauds by following some systematic
rules or practices.
Preparation
of Final Accounts in Single Entry System
In
single entry system, final accounts are prepared as statement of affairs and
statement of profit or loss as like p/l a/c and balance sheet in double entry
system.
Preparation of statement of
affairs
All liabilities except capital are
compared with all assets and the result or balancing figure is treated as
capital balance of a business.
Preparation of statement of
profit or loss
Ø
Ascertaining
opening capital by preparing statement of affairs for opening capital. Last
year’s transactions of assets and liabilities are compared in statement of
affairs and the closing capital is found.
Ø
Ascertaining
closing capital by preparing statement of affairs for current year data as like
closing capital computation.
Ø
Ascertaining
adjusted closing capital by adding drawings and subtracting additional capital
from closing capital.
Ø
Preparing
statement of profit or loss by subtracting the opening capital from the
adjusted closing capital.
STATEMENT OF AFFAIRS OF MY.X AS
ON 31.03.2012 or 1.04.2011
|
LIABILITIES
|
RS.
|
ASSETS
|
RS.
|
|
Sundry Creditors
Bills Payable
Capital (opening or closing)
B/F
|
Xxxx
Xxxx
xxxx
|
Sundry Debtors
Stock
Cash in Hand
Cash at Bank
Fixed Assets
Bills Receivable
|
Xxxx
Xxxx
Xxxx
Xxxx
Xxxx
xxxx
|
|
Total
|
Xxxx
|
Total
|
Xxxx
|
STATEMENT OF PROFIT OR LOSS OF MR.X DURING THE YEAR 2011-12
Closing Capital
xxxxx
Add: Drawings
xxxxx
xxxxx
Less: Additional
Capital
xxxxx
Adjusted Closing
Capital xxxxx
Less: Opening
Capital
xxxxx
Profit or loss
xxxx
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