Double Entry vs Single Entry
An accounting system can be defined as an organized set of manual, accounting methods, procedures, and controls established to gather, record, classify, summarize, interpret, present timely and accurately for decision making. Book keeping is a process in which the financial records of a business are kept well organized, and up-to-date. There are two systems of book keeping or recording transaction, one is double entry system, and the other one is single entry system. Due to some serious drawbacks of single entry method, and the superior characteristics of double entry system, single entry method had been given up, and double entry system is used widely all over the world. Furthermore, widely accepted accounting bodies and renowned accounting professionals promoted double entry system over single entry system.
Single entry system record only one entry, either debit entry or credit entry, for a given transaction. For example, if cash is paid to someone, either cash will be credited, or debtor account will be debited. Single entry system is more like a check book register. It doesn’t track asset and liability accounts, so this system may facilitate to calculate the net income to a certain extent, but not to have a look on the current financial position of the entity. This system may be suitable for small businesses like sole proprietorship to which legal requirements and chances for frauds are no or very little.
Under the double entry system, every single debit entry has a corresponding credit entry, and every single credit entry has corresponding debit entry; that is, every entry has an opposite entry. Since it has two opposites for a single transaction, arithmetic accuracy can be checked easily by preparing a trial balance. According to the accounting standards, all companies (public or private, listed or not), and partnerships are advised to follow double entry book keeping. It is mandatory for an organization to prepare and send final accounts to tax departments using double entry system for the purpose of calculating tax.
What is the difference between Double Entry and Single Entry?
• There will be only one entry in single entry system, whereas two entries are needed in double entry system for any given transaction.
• Single entry is an incomplete record, whereas double entry is a complete record of book keeping.
• Double entry system of book keeping is more complex and time consuming than single entry system of book keeping.
• Cash and bank transactions are recorded in the same column under single entry system, while both are separately recorded in the counterpart.
• Ways of identifying errors are very less in single entry system, however, in double entry system, some of the errors can be identified by crosschecking one entry with the corresponding opposite entry.
• Trial balance can be prepared for arithmetic accuracy in double entry system, but it is not possible in single entry system.
• All debit and credit entries are recorded in the same coloumn.
• Final accounts can be prepared very easily under double entry system, however, that is not possible under single entry system.
• There is a mandatory requirement to use double entry system, but not to single entry system of book keeping.