Coupon Accepted Successfully!


Meaning of Single Entry System

Accounts from Incomplete Records or Single Entry System is a system in which accounting records are not kept according to double entry principle of book keeping.

Unlike Double Entry System in Single Entry System, no set rules are followed - even the books of accounts to be maintained are not certain. Usually, under this system, the cash book and personal ledgers are maintained; real and nominal accounts are not. Since both the aspects of transactions are not recorded, the system is known as “Accounts from Incomplete Records” or “ Single Entry System of Accounting”.

Definition of Single Entry System

Kohler defines Single Entry System as “ A System of book keeping in which as a rule only records of cash and of personal accounts are maintained, it is always incomplete double entry varying with the circumstances”.

Ascertaining Profit under Single Entry System
The main purpose of any business is to earn profit. Every business owner, therefore, is desirous to know whether he has earned profit or incurred loss after a certain period of time generally after the end of a year. In fact, to ascertain profit or loss becomes all the more essential if the business happens to be a partnership firm because the partners have to share the profits of the firm at the end of the each accounting period. Then, the question arises as to how to ascertain profits when the accounting records are incomplete, accounts are maintained under the Single Entry System. The reason is that Profit and Loss Account cannot be prepared in the absence of Trial Balance. In such a situation, there are two methods used for ascertaining profits of the business. They are-
  1. Net Worth Method or Statement of Affairs Method and
  2. Conversion Method

Calculation of missing figures

Ascertaining Total Purchases- Total purchases are calculated by combining cash and credit purchases. Cash purchases, if not given in the question, can be ascertained by balancing cash book. Credit purchases are calculated by preparing - i. total creditors account or ii. Total creditors and bills payable account.

Ascertaining Total Sales:
The Total Sales are calculated by combining cash and credit sales. Cash sales are given in the cash book. Credit sales are ascertained by preparing i. Total debtors account or ii. Total debtors account and bills receivable account.

Ascertaining Balances of Bills Receivable and Bills Payable:
If the Opening or closing balances of these items are not given, the missing figures can be ascertained by preparing Bills Receivable or Bills Payable Account.

Calculation of the Value of Opening and Closing Stock:
Sometimes, the value of opening stock is not given in the question but closing stock, total purchases, total sale and percentage of profit on cost of goods are given, value of opening stock can be ascertained on the basis of these information. Similarly, sometimes value of closing stock is not given. In such situation, if opening stock, total purchase, total sale, percentage of profit on cost or percentage of profit on sales value are given, value of closing stock can be ascertained.

Test Your Skills Now!
Take a Quiz now
Reviewer Name