Single Entry Bookkeeping Accounting System

The usual subsidiary books maintained under the double entry system of book-keeping are also maintained under the single entry system, but the postings are made from these subsidiary books of those entries which affect personal accounts. Real and nominal accounts are not maintained under this system. Since only one aspect of every transaction is usually recorded under this system, therefore, the system 1s called 'single entry system'. It should be noted that single entry system is not any particular system of book-keeping, but rather the double entry system in an incomplete and disjointed form.

Disadvantages of single entry system

1. Since the two-fold aspect of every transaction is not recorded in the books of accounts, therefore, the arithmetical accuracy of the books of accounts cannot be ascertained by means of a trial balance.

2. It is not possible to obtain accurate information regarding the results of business operations, as under single entry system, nominal accounts relating to losses, expenses, gains and incomes have not been maintained. In the absence. of these accounts, necessary classified information required for preparing pr9fit and loss account is not available. Hence profit and loss account cannot be prepared.

3. Information relating to assets and liabilities cannot be reliable because respective accounts have not been maintained. Thus, even balance sheet cannot be prepared. Consequently, true financial position of the business cannot be ascertained.

4. In the absence of various checks, fraud is more easily committed and it is very difficult to detect.

Ascertaining profit under the single entry system

Under the single entry system of book-keeping, it is not possible to prepare a regular trading and profit & loss account, because no record is kept of the nominal accounts, therefore, the exact profit or loss for a particular period cannot be ascertained. The net profit for a particular period can be ascertained in a rough manner by comparing the financial position of the business at the commencement of the period with the financial position at the end of the period. This requires the preparation of two statements of affairs, one in the beginning and the other at the end.

Opening and closing balances of capitals can be the ascertained by preparing statement of affairs, and comparison of the capitals at the two dates will reveal either profit or loss.

Preparation of a statement of affairs

A statement of affairs (for this purpose is a document in the form of a balance sheet, showing on right hand side the amounts (estimated) of the various assets and on the left hand side the estimated amounts of liabilities. The difference of the two sides represents capital of the owner i.e. net worth. .

First a statement of affairs as at the beginning of the period should be prepared. For this, particulars of assets and liabilities as on the date should be collected with the assistance of the owner. The value of the fixed assets (plant, building, machinery, fixtures etc.) should be arrived at as follows-Proprietor will probably remember their original cost and the date of acquisitions from which (cost) appropriate amount of depreciation should be deducted, this will give 'written down value' of such assets which should be included in the statement of affairs. Stock taking should be done physically; lists be prepared and valuation to be done adopting cost or market price whichever is lower. Bank balance can be ascertained from the pass book or statement of account supplied by the bank. Cash can be physically counted. Debtors and creditors can be ascertained from the personal ledger.

As already stated, excess of assets over liabilities represents capital. After preparing statement of affairs, both at the beginning of the period and at the close of the period the profit or loss (for the period) is ascertained by comparing the capital at the end of the period with that at the beginning. Adjust the capital at the end by adding drawings there to and deducting there from fresh capital introduced.


Proprietor of HiTech Computer Services, Anil Kumar Gupta, Bachelor of Engineering (Hons.) in Electrical and Electronics Engineering from Birla Institute of Technology and Science, Pilani, India, Year of passing : May, 1985, is born on January 7, 1964 , Age : 40+, and is Indian national. Services Offered by HiTech Computer Services : Standard software for various business segments, Customized Software Development, Websites and web based ASP applications development, Financial Accounting and...

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Have a question for Anil?

13th April 2015 3:31pm
why depreciation on fixed asset is charged on closing value in single entry system.

18th July 2015 3:59am
How the depreciation should be caluculated on fixed assets if there is difference in opening and closing values?

R.Satyanarayana murhty
26th July 2015 1:28pm
how to treat opening drawings which are given in single entry problem.

18th September 2015 4:43am
how to treat depreciation on opening balance in single entry and what is yhe meaning of the sentence " for difference Rs4000 for six months"?

vikash gupta
24th September 2015 10:59pm
sir while preparing statement of profit and loss accounts by single entry system what is the treatment for
1. Insurance policy matured during the year, deor rs 10000
2. Rs 1000 cost of furniture sold for 5000 on 1 jan 1997
total furniture in 1 jan 1997 is 3000 and furniture at 31 dec 1997 is 2000

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