Difference Between Double Entry System and Single Entry System
The double-entry system of accounting or bookkeeping means that for every business transaction, amounts must be recorded in a minimum of two accounts.
Double Entry System
- Under this system, both aspects of each transaction are recorded.
- Persona, real and nominal accounts are kept full.
- The cashbook, general ledger debtors ledger, and creditors ledger are maintained.
- Arithmetical accuracy can be checked by preparing a trial balance at any time.
- Trading, profit and loss accounts, and balance sheets are prepared.
- For interpretation of the financial statement, different ratios can be computed.
- This system is scientific and follows certain rules.
Single Entry System
A single entry system of accounting is a form o bookkeeping in which each of a company’s financial transactions are recorded as a single entry in a log.
- Under this system, both aspects of each transaction are not recorded.
- Only personal accounts are kept and real and nominal accounts are ignored.
- Only debtor’s and creditors’ ledgers are kept. The cashbook is also kept, but personal transactions get mixed up with business transactions.
- Arithmetical accuracy cannot be checked as no Trial Balance is prepared.
- Trading, Profit and Loss Account, and balances cannot be prepared.
- Vital ratios cannot be computed.
- This system is unscientific and does not follow any concrete rules.
Wrapping it up
It seems that the single entry system is the oldest method that has been used by peoples; yet it has been still used in different required parts but the most educated and efficient is the double-entry system for all the businesses to make every detail more clearly.