A business could keep records of its financial transactions ( Also see Lesson for Financial Accounting ) using a single entry system or double entry system. The former is less work and less time consuming while the latter requires more effort and time.
The single entry system is the earliest method to keep monetary records. Every transaction gives an entry. In single entry system, the corresponding opposite entry is not made due to the fact that the transaction is recorded once. The record of the transaction is not complete because there is only single entry for each transaction. It generally tracks the transaction of disbursements and cash receipts.
The double entry system is the technical approach to keep financial records. Double entry system is according to the concept of duality which means that each transaction will have a dual aspect. Every transaction will influence two accounts simultaneously, where an account is debited, the other account is credited. ( Also see Accounting – Debits and Credits )
The following are the significant differences between the single entry system and the double entry system of accounting: (Also see Single Entry System Versus Double Entry System)
- Single entry system only records an aspect of the transaction, either credit or debit. Double entry system records both aspects of the transaction.
- Incomplete records are kept in single entry system, while complete records are kept under double entry system.
- Single entry transaction is easy and simple, while the double entry system is complicated and requires professionals in accounting.
- Embezzlement and frauds are easy to be determined in the double entry system but could not be identified in the single entry system.
- It is hard to compare 2 accounting durations in single entry system while it is easy to compare in the double entry system.
- The single entry system is suitable for small businesses; big corporates is recommended to use double entry system.
- Single entry system keeps personal, and cash accounts, whereas real, personal and nominal accounts are kept under double entry system.
You may keep records in single entry system, but it is recommended to apply double entry system (Also see Advantages of double entry accounting) in your business’s accounting. Do not hesitate to contact any accounting firm in Johor Bahru for more information regarding the entry system.