Single entry system is an incomplete recording of financial or monetary transactions. It called single entry recording system because only one side or aspect of a transaction is registered or recorded not both sides. It is optional to write down two sides of a transaction. Basically there are no standing orders or rules and regulations to record monetary or economic deals of the company in single bookkeeping system. So, we can say that this is not a proper system of keeping or maintaining records or financial transaction. That is why it is unable to present complete information required by financial managers.
Primarily single entry recording system preserves personal accounts and real account excluding cash accounts. Real accounts and normal accounts except cash account are ignored by single entry system. So, we cannot show true and proper financial position and profit and loss of an organization. This entry system is mostly maintained by smaller businesses. It records data mostly related to cash, taxes, account receivable and account payable. There is no need to hire trained person to record transactions in single entry accounting system. It is very simple and easy system based on income statement.
Important Characteristics of Single Entry System
Following are the important facts of single-entry system.
- This system is not self-balancing. There is no equal debits and credits in single entry system.
- It may consist only general journal, day book etc. or a finished set of ledger and journal.
- It does not provide information necessary for financial decisions and financial planning. So, it can lead to ineffective or unfit direction.
- It does not follow standard set of accounting principles for determining profit and loss of the business.
- It does not record all aspects of monetary transactions of the organization.
- For recording cash receipts and payments of the business it maintain cash book for a certain period of time.
- It maintains personal accounts like creditors, debtors and organizations to judge credit Purchases and credit sales during a certain period time.
- In single entry system chances of fraud are more than double entry system because there is only one book of records in single entry accounting system.
Example of Three Column Single Entry System