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Single Entry System - Features, Advantages and Limitations


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This system is suitable for sole trader or partnership firm. Limited Companies cannot maintain accounting books on single entry system because of legal provisions.


No uniformity

This system may differ from firm to firm as it is a mere adjustments of double entry system according to requirements and conveniences of the persons


Maintenance of Personal Accounts

Usually under this system, only personal accounts are maintained and real and nominal accounts are avoided. Therefore sometimes, it is defined as a system where only personal accounts are kept.


Maintenance of cash book

A cash book is generally maintained in this sytem which mixes up business as well as private transactions


Dependence on Original Vouchers

Under this system, one has to depend on original vouchers for the collection of necessary information.


Preparation of Final Accounts

In the absence of all nominal and real accounts, the final accounts cannot be prepared easily. After converting the available information into double entry records and the missing amounts have been found out, only Trading and Profit and Loss account can be prepared. The amounts of assets and liabilities can also be computed from incomplete records, but they are based on estimates. That is the reason why the statement of assets and liabilities prepared under this system at the end of the accounting period is called a “Statement of Affairs” instead of “ Balance Sheet”.




Simple Method

Single Entry is a very simple method of recording business transactions


Less Expensive

Compared to Double Entry System of book keeping, this is less expensive


Suitable for small concerns

It is mainly suited to small business concerns with limited number of transactions and very few assets and liabilities


No need of Adequate knowledge of Principles of Book Keeping

Under Single entry system, accounting records can be easily maintained as their maintenance does not require adequate knowledge of the principles of book keeping


Easy to ascertain Profit or Loss

Ascertainment of profit or loss is much easier. The Proprietor has to compare the financial condition of business at the close of the accounting period with that at the beginning.




Arithmetical Accuracy cannot be proved

Trial Balance cannot be prepared and hence, arithmetical accuracy of books cannot be proved or tested. Chances of error, mischief or fraud remaining undetected are high.


No control on assets

Since asset accounts are not maintained, it may be difficult to keep full control, in order to avoid misappropriations of assets


True profits cannot be known

Trading and Profit and Loss Account cannot be prepared and hence the correct profit earned or loss suffered during the accounting period is not known


Financial position of the business cannot be judged

Balance sheet, called Statement of Affairs under Single Entry System, is prepared in an unsatisfactory manner. The assets and liabilities are not provided from records but are put down by physical inspection and on estimated basis. Thus, exact position of total net assets cannot be known


No Internal Check

Since internal check is not possible, the method gives enough room for errors and frauds, besides their detection very difficult


Difficult to ascertain the value of Business

The records being inadequate, it is difficult to value the business, especially goodwill.


Inadequate for Planning and control

Accounting information supplied by the accounting records is inadequate for managerial planning and control


Incomplete and Unscientific System

This system is incomplete and unscientific as both the aspects of a transaction are not recorded and no set rules are followed for recording them


Comparitative study is difficult

A major defect of this system is that the financial position of the current year cannot be compared with that of the previous year due to incomplete information of transactions of business

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