The main difference between the Single Entry System and Double Entry System is that Single Entry System register a procedure with a single input and only keeps one side of all transaction, and Double Entry System is an absolute, entire and scientific system of record-keeping.
Single Entry System vs. Double Entry System
The single entry system is a system of book-keeping in which as the rules, only records of cash and personal accounts maintained. The double entry system is considered as a scientific method of book-keeping, records two aspects namely giving aspect and relieving aspect of the business transactions. The single entry system is an incomplete system of book-keeping, whereas the double entry system is a perfect, and complete system of book-keeping. Single entry system only records a single aspect of the transaction. Double entry system records both the debit and credit aspects of the transaction. Single entry system maintains personal accounts of debtors, creditors and a cash book for the recording of transactions, and double entry system maintains personal, real and nominal accounts for the recording of transactions. The single entry system is mainly used by small business firms and partnership firms, on the other hand, the double entry system is can be used by both small and big business firms for recording the transactions. There is no need for specific knowledge to maintain books in single entry system while the person who is responsible for book-keeping in a double entry system should possess specialized knowledge and skills. Single entry system of book-keeping is less costly and considered as the simple way of recording transactions, and Double entry method of book-keeping is costly and complex work is involved in the recording of transactions.
What is Single Entry System?
A single entry system records or registers a transaction with a single entry and only maintains one side of every transaction. It is the old way of logging or register financial operations and is least renowned than the double entry system and primarily used for records in the income statement. This term is used to explain the problems associated with the accounts from an incomplete transaction and popularly called as ‘Preparation of accounts from incomplete records’. The single entry system is mostly used in the manual process of accounting and by small firms who do not have the financial ability and resources that are necessary for a full-fledged accounting system.
Types of Single Entry System
- Pure Single Entry: In this, no details are available of sales, purchases and cash and bank balances only personal accounts considered.
- Simple Single Entry: This account kept based on double entry system but only two accounts are considered. Entries are made only from these accounts and no other account considered.
- Quasi Single Entry: In this accounting apart from the personal and cash accounts, other subsidiary accounts also maintained. The important ones being sales, purchases accounts, and bill books. Discounts also recorded in the personal account.
What is the Double Entry System?
Most businesses, being most small businesses, use double-entry bookkeeping for their accounting needs. Two features of double-entry bookkeeping are that each account has two columns and that each transaction located in two accounts. Two entries made for each transaction – a debit in one account and a credit in another. An example of a double-entry transaction will be if the company wants to pay off a creditor. The cash account reduced by the amount the company owes the creditor. It would be the debit. Then, the double entry lessens the amount the business now owes to the creditor account as it has obtained or received the amount of the credit the business is extending. That is the credit or loan. If you want to maintain a record of asset and liability accounts, you want to use double-entry bookkeeping instead of single-entry. Further benefits of double-entry records or book-keeping are that the holder can properly calculate gains and losses in complex system, financial records or balance-sheet can be made immediately just from the books, mistakes and frauds or deception are easy to find.
- The bookkeeping structure in which only one aspect of a transaction recorded, i.e. either debit or credit, is known as the single entry system. Double entry system, is a system of keep records, whereby both the aspects of a transaction captured.
- In a single entry system, incomplete records maintained while in double entry system complete recording of transactions is there.
- The single entry procedure is simple and easy whereas the double entry system is complex as well as it requires expertise in accounting for maintaining records.
- In a single entry system comparison among the two accounting periods is very difficult. Conversely, we can easily match two accounting periods in the double entry system.
- Single Entry System keeps personal and cash accounts. On the other side, personal, real and nominal accounts kept in a double entry system.
- The Single Entry system is more appropriate for small enterprises, but big organizations prefer the double entry system.
Beyond everything, it is clear that the single entry system is incomplete and the double entry system is complete and scientific. Furthermore, Single entry system does not provide any security from fraudulent accounting practices, while there is a chance of fraud in every business and it is true that double entry system can help to exclude fraudulent practices in maintaining accounts.