The double-entry system of accounting or bookkeping means that for every business transaction, amouts 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.
- 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 sheet are prepared.
- For interpretation of the financial statement, different ratios can be computed.
- This system is scientific and follows certain rules.
Single Entry System
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 is not recorded.
- Only personal accounts are kept and real and nominal accounts are ignored.
- Only debtors and creditors ledgers are kept. 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 Balance 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 single entry system is the oldest methods that has been used by peoples, yet it has been still used in different required part but the most educate and efficient is double entry system for all the business to make every details more clear.