Difference between Single Entry System and Double Entry System

Meaning of Basis of Accounting

The Basis of Accounting is related to the timing of recording the business transaction in the books of account. It is concerned with a specific time period at which all the incomes and expenses are recorded by a business enterprise. There are two bases for recording the transactions in Accountancy:...

Single Entry System

A single entry system is a system of bookkeeping that considers only one aspect of all financial transactions, which means that transactions affect only one account. Under this system, value of only one account will increase or decrease according to the nature of the transaction taken into consideration. The accounting details are maintained only by preparing a cash book and personal accounts of debtors and creditors, and real and nominal accounts are not recognized under this system of bookkeeping. The profit ascertained under the single entry system is pretty inaccurate, as only one aspect of all the transactions is taken into account. Preferably, small businesses and shopkeepers adopt this method of bookkeeping, as there are no set rules to maintain the accounts, hence is comparatively much easier than the double-entry system. Accounting records maintained under this system are also known as incomplete records....

Double Entry System

A double entry system of bookkeeping considers at least two aspects of all the financial transactions of a business unit. Under this system, at least two accounts are affected in opposite directions, i.e, one of them is debited and another one is credited with an equal amount. The three basic accounts- personal account, real account, and nominal account are all recognized under the double entry system, and hence, a profit ascertained is much more accurate and can reflect a real financial position of a business enterprise. Generally, professionals are hired to maintain accounts under this system, as a strict set of rules is to be followed. A trial balance can be prepared under this system of bookkeeping, which makes it possible to check the arithmetic accuracy of the accounting records as the debit side is always equal to the credit side under the double entry system. Under the double entry system, all the necessary accounts, like Journal, Ledger, Trial Balance, Financial Statement, and Balance Sheet are prepared to compute the profit and know about the financial position of any business unit....

Difference between Single Entry System and Double Entry System:

Basis          Single Entry System            Double Entry System Meaning            A single entry system is a system of bookkeeping that consider only one aspect of all the financial transactions. A double entry system of bookkeeping considers at least two aspects of all the financial transactions of a business unit. Number of       accounts affected Only one account is affected under this system. At least two accounts are affected, i.e., one of them is debited, and another is credited. Accounts           Recognition The single entry system recognizes only personal accounts. Both personal accounts and impersonal accounts(real and nominal accounts) are recognized. Nature of recording                                        Under a single entry system, incomplete records are maintained. It is a system of the complete bookkeeping of accounts. Based on specific rules No set of rules is followed for bookkeeping under this system. Specific rules are followed while preparing accounts under this system. Checking Arithmetic Accuracy  It is not possible to prepare Trail Balance under a single entry system, hence arithmetic accuracy of accounts cannot be checked. Trial Balance is prepared to check the arithmetic accuracy of accounts. Ease of maintaining accounts  Easy to maintain as no set of rules is to be followed.   A specific set of rules is to be followed, making it a complex task. Cost of maintaining The owner himself can maintain the accounts, hence no or less cost is incurred to maintain the books of account. Professionals are hired to maintain the books of account, so it is expensive in nature. Accuracy of Profit/loss  Profit and loss ascertained are inaccurate due to incomplete records. The accuracy of the Profit/loss computed is high. Suitability It is suitable for small businesses and shopkeepers.  It is suitable and adopted by large firms....