Single Entry Accounting System
Single entry system
of book keeping may be described as a loose and defective way of recording
transactions, wherein some transactions are recorded in their two fold aspect, some are recorded in so far as they effect one aspect only, and
few other are completely omitted to be recorded. Thus it can be seen that there
is no system or method about single entry. Under this system a cash book and
other ledger are maintained.
Disadvantages of
Single Entry System:
- Since every debit does not have a corresponding credit, a Trial Balance can not be extracted to test the arithmetical accuracy of the entries.
- In absence of proper records of any assets and of any allowances for depreciation or other losses of value, it is not possible to prepare a Balance Sheet.
- It is too easy to perpetrate the errors and frauds and too difficult to detect them.
The book Keeping and Accounting Process
In accountancy the
Double Entry Bookkeeping (or double entry accounting) is the basis of the
standard system used by businesses and other organizations to record financial
transactions. The system is called ‘double entry’ because each transaction is
recorded in at least two accounts. Each
transaction results in at least one
account being debited and at least one account being credited with the total
debits of the transaction equal to the total credits.
For example : - If Company A sell an item to Company B and Company B pay Company A by cheque then the book keeper of Company A credits the “Sales” and debits the “Bank”. Conversely the bookkeeper of Company B debits the account “Purchases” and credits the account “Bank”.
Historically the
debit entries are recorded on the left side and credit values on the right hand
side of the general ledger account and in the normal course of business, a
document is produced each time a transaction occurs. Sales and purchases
usually have invoices or receipts. Deposit slips are produced when lodgements
(deposits) are made to a bank account. Bookkeeping involves recording the
details of all of these source documents into multi-column journals (also known
as a book of first entry or daybooks.)
After a certain
period typically a month, the columns in
each journal are totaled to give a summary for the period. Using the rules of
double entry, these journal summaries are then transferred to their respective
accounts in the ledger is called Posting. Once the posting process is complete,
accounts kept using the “T” format undergo balancing which is simply a process
to arrive at the balance of the account.
Double entry accounting system
The system of
double entry may be well compared to a scale which must have equal weight on
both sides in order that the scale is balanced. Thus if the weight of one side
of the scale is increased or decreased the same weight must be correspondingly
added to or removed from, the other side. A more common expression of double
entry book keeping system is the accounting equation. For discussion of double entry system you
can see the
previous article.
Source: ICFRE
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