Single Entry System: Accounting for Small Business from Incomplete Records:


Introduction to Single Entry System

Who use the Single Entry System and Why?

Single Entry System of Accounting, also known as Accounting from Incomplete Records, is a non-standard and non-scientific system of accounting. This system is adopted by small businessmen as they do not have enough capital and expertise to employ the standard double entry system of accounting in their business. Sometimes the cost of maintaining accounts under double entry system is too high to be justified for a small business and the owner prefers to maintain the basic records as per his convenience. Thus this system can also be called small business accounting.

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How are Records kept under Single Entry System?

Single Entry System does not mean “one entry” for each transaction. It is a system where incomplete records are kept. For some transactions, both the aspects of the transaction are recorded. For some transactions, only one aspect is considered whereas some transactions are completely omitted. Thus the Single Entry System of Accounting is a mixture of “no entry, one entry and double entry”.

For example, double entry is made for all cash receipts from debtors and cash paid to creditors; single entry is made for purchase and sale of goods, and no entry is generally made for bad debts, doubtful debts or depreciation.

Actually the Single Entry System is no particular method of accounting. It is actually the absence of any particular method.

One thing which I want to stress here is that, no matter how small a trader is, he will always keep records of his Debtors, Creditors and his Cash transactions. The Real Accounts and Nominal Accounts are ignored. Thus it may be concluded that this system of keeping accounting records is incomplete, unscientific and full of defects.

Features of the Single Entry System

  1. There is no standard rule of operation or protocol. Records are kept as per the convenience of the record keeper (who is mostly the owner of the business) and varies from business to business.
  2. This system is found mainly in Small Businesses like Sole Proprietorship and Partnership Firms.
  3. There is no particular method of accounting. As already said, it is a mixture of no entry, one entry and double entry.
  4. Usually the Cash transactions and transactions with Debtors and Creditors are recorded. Items of other real and nominal accounts are ignored.


Defects of Single Entry System

It is needless to mention that this system is full of defects. Let us list some of them.

  1. A Trial Balance cannot be prepared as complete records of double aspect of each transaction is not kept.
  2. The arithmetical correctness of the accounting records cannot be verified as the Trial Balance cannot be prepared.
  3. The accounts cannot be relied upon.
  4. Errors and frauds can easily creep into this system.
  5. For concerns governed by legal provisions like Companies, this system cannot be applied.
  6. The real worth of a business cannot be ascertained as a Balance Sheet cannot be prepared.
  7. Tax authorities do not approve incomplete records. Also the Audit of the accounts becomes difficult.

Difference Between Single Enntry and Double Entry Accounting

Difference Between Single Entry and Double Entry System

Sl No.Single Entry SystemDouble Entry System
1No specific rule of operation is followed hereIt follows some definite rules and norms
2It does not consider dual aspects of all transactionsIt considers the two equal but opposite aspects of each transaction
3It considers only cash transactions and transactions with debtors and creditorsIt considers all transactions
4The Trading and Profit and Loss account cannot be prepared. The Balance Sheet cannot be prepared too.Trading, Profilt and Loss Account and the Balance Sheet can be prepared.
5The Trial Balance cannot be prepared and the aritmetic accuracy cannot be verified.The Trial Balance is prepared to verify the arithmetical accuracy.
6All concerns cannot adopt this system. Concerns governed by legal provisions are not allowed to keep incomplete accounting records. It is generally followed by small businesses who cannot employ the double entry system due to its high cost.Any concern can adopt this method.
7Incomplete records are not recognised by the Government and Tax Authorities.Double Entry System is recognised by all.


This was a brief introduction of the Single Entry System. I have tried to cover the basic points here. Please comment below if you want to add anything to the above. In future posts I will cover more aspects related to this topic. Please subscribe for updates. Thanks for reading! Also visit our YouTube Channel for Hindi Tutorials on Accounting

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