1

BY: VIKRAM.G.B
Lecturer, P.G Dept of Commerce
Vivekananda Degree College, Bangalore-55

Unit 1
Conversion of Single Entry to Double Entry

MEANING:
All business transactions are has two aspects namely Debit and Credit, If these two aspects of a transaction
are recorded, which system is known as the Double entry system.
The term single entry is vaguely used to refer to any method of maintaining accounts which does not
conform to strict principles of double entry system, under single entry method only one aspect of a
transaction is recorded, it may be debit without a corresponding credit and vice versa.

This system is not based on any scientific system therefore it cannot be termed as a system, It is
incomplete and unsatisfactory system and it is clear that accurate information of the operations of the
business is entirely lacking.
Single entry system is a system of accounting, which does not follow the double entry system. Under this
system, accounts relating to debtors and creditors are maintained.

DEFINITION:
Kohler defines single entry system as a system of book keeping which as a rule only records of cash and
personal accounts are maintained, it is always incomplete double entry varying with circumstances

According to R.N.Carter Single entry cannot be termed as a system, as it is not based on any scientific
system, like double entry system. For this purpose, single entry is now-a-days known as preparation of
account from incomplete records

MEANING OF DEBIT AND CREDIT
The word debit is derived from the Latin word Debitum which means Due for that. In short, the benefit
receiving aspect of a transaction is known as debit. The word credit is derived from the Latin word Creder
which means Due to that. In short, the benefit giving aspect of a transaction is known as credit.

The abbreviations Dr for debit and Cr for credit are usually used. By convention, the left hand side of
an account is termed as debit and right hand side of an account is termed as credit side.

FEATURES OF SINGLE ENTRY SYSTEM:
a. Maintenance of books by a sole trader or partnership firm: The books which are maintained according
to this system can be kept only by a sole trader or by a partnership firm.
b. Maintenance of cash book: In this system it is very often to keep one cash book which mixes up
business as well as private transactions.
c. Only personal accounts are kept: In this system, it is very common to keep only personal accounts and
to avoid real and nominal accounts. Therefore, sometimes, this is precisely defined as a system where
only personal accounts are kept.
d. Collection of information from original documents: For information one has to depend on original
vouchers, example, in the case of credit sales, the proprietor may keep the invoice without recording it
anywhere and at the end of the year the total of the invoices gives an idea of total credit sales of the
business.
e. Lack of uniformity: It lacks uniformity as it is a mere adjustment of double entry system according to
the convenience of the person.
f. Difficulty in preparation of final accounts: It is much difficult to prepare trading, profit and loss account
and balance sheet due to the absence of nominal and real accounts in the ledger.



2
BY: VIKRAM.G.B
Lecturer, P.G Dept of Commerce
Vivekananda Degree College, Bangalore-55

DIFFERENCE BETWEEN SINGLE ENTRY SYSTEM AND DOUBLE ENTRY SYSTEM:
The distinctions between double entry system and single entry system are as follows:
I. In double entry system both the aspects (debit and credit) of all the transactions are recorded. But in
single entry system, there is no record of some transactions; some transactions are recorded only in
one of their aspects whereas some other transactions are recorded in both of their aspects.
II. Under double entry system, various subsidiary books such as sales book, purchases book etc., are
maintained. Under single entry system, no such subsidiary books except cash book which is also
considered as a part of ledger is maintained.
III. In the case of double entry system, there is a ledger which contains personal, real and nominal
accounts. But in single entry system, the ledger contains some personal accounts only.
IV. Under double entry system, preparation of trial balance is possible whereas it is not possible to prepare
a trial balance in single entry system. Hence accuracy of work is uncertain.
V. Under double entry system, Trading A/c, Profit & Loss A/c and the Balance Sheet are prepared in a
scientific manner. But under single entry system, it is not possible only a rough estimate of profit or
loss is made and a Statement of Affairs is prepared which resembles a balance sheet in appearance but
which does not present an accurate picture of the financial position of the business.

BENEFITS OF SINGLE ENTRY SYSTEM
A. Its quick and easy to maintain.
B. One doesnt require employing a qualified accountant.
C. This is extremely useful for business run by individuals where the volume of activity is not large,
D. It is economical as it does not need a comprehensive record keeping.

WEAKNESSES OF SINGLE ENTRY SYSTEM
a) As principle of double entry is not followed, the trial balance cannot be prepared. As such,
arithmetical accuracy cannot be guaranteed.
b) Profit or loss can be found out only by estimates as nominal accounts are not maintained.
c) It is not possible to make a balance sheet in absence of real accounts.
d) It is very difficult to detect frauds or errors.
e) Valuation of assets and liabilities is not proper.
f) The external agencies like banks cannot use financial information. A bank cannot decide whether to
lend money or not.
g) It is quite likely that the business and personal transactions of the proprietor get mixed.

CONVERSION METHOD
Conversion of single entry in to double entry involves the complete process of journalizing, posting,
balancing and preparation of trial balance. Then final accounts are to be prepared if any information is
missing, it should be ascertained by preparing the relevant accounts before preparation of final accounts

Following steps are taken
1. Prepare statement of accounts in the beginning so as to ascertain capital in the beginning
2. Prepare cashbooks, cashbook reveals missing figure cash or bank balance at the beginning or at the
end as the case may be. Sometimes cashbook reveals the amount of sundry expenses or drawings
or cash purchases(if credit side is shorter than debit) or cash sales or sundry incomes or capital
introduced(if debit side is shorter than credit side)
3. Then prepare (1)total debtors account (2) total creditors account,(3) bills receivable account
4. bills payable account(these accounts help in finding out credit sales, credit purchases, debtors or
credit balances
5. After preparing these accounts, calculate total sales by adding credit sales and cash sales total
purchases by adding cash purchases and credit purchases
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BY: VIKRAM.G.B
Lecturer, P.G Dept of Commerce
Vivekananda Degree College, Bangalore-55

6. Information relating to nominal accounts can be ascertained from the cashbook. Real accounts and
amounts outstanding are given by way of information. These accounts can be completed
7. After these it will be possible to prepare final accounts in the usual manner

OPENING STATEMENT AFFAIRS:
It is prepared with the help of assets and liabilities at the beginning to find out the opening capital. When
the opening balance of cash, debtors, creditors, stock etc., are not given in the problem, respective
accounts, must be prepared first and the balance ascertained must be taken in the preparation of
statement of affairs. The following is the format of opening statement of affairs.

Liabilities Amount (Rs.) Assets Amount (Rs.)
Bank Overdraft
Bills Payable
Creditors
Outstanding expenses
Incomes received in
advance
Capital (Balancing figure)
Cash in Hand
Cash at Bank
Bills Receivable
Debtors
Stock
Prepaid Expenses
Accrued Income
Furniture
Plant and Machinery
Vehicle

It is generally prepared to ascertain the opening balance of capital.

MEMORANDUM TRADING ACCOUNT:
When the Gross profit or percentage of gross profit is given in the problem, then it is an indication that any
one of the Trading account item is missing. It could be opening stock or Total purchases or Closing stock or
Total sales. To ascertain that, memorandum Trading account must be prepared.
Format of memorandum trading Account
Dr. Cr.
Particulars Amount (Rs.) Particulars Amount (Rs.)
To opening stock
To purchase less: Returns Outwards
To wages
To freight (carriage inwards etc.,)
To manufacturing expenses
To custom duty (clearance charges)
To cold, gas, water, power, fuel etc.,
To other direct expenses
To gross profit

XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
By sales Less: Sales returns
By closing stock

XXX
XXX







XXX
Trading Account is prepared to ascertain any one of the following:
1. Opening stock
2. Closing stock
3. Purchases
4. Sales
5. Direct expenses

MEMORANDUM OF PROFIT AND LOSS ACCOUNT:
When net profit is already given in the problem it is an indication that any one of the item of profit and loss
account is missing. It could be sundry expenses or sundry incomes (in this case memorandum of P&L A/C is
prepared before preparing cash book).
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BY: VIKRAM.G.B
Lecturer, P.G Dept of Commerce
Vivekananda Degree College, Bangalore-55

Format of Memorandum of Profit and loss account
Particulars Amount (Rs.) Particulars Amount (Rs.)
To salaries
To rent
To commission
To interest
To advertisement
To bad debts
To discount allowed
To depreciation
To sundry expenses
To net profit
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
By gross profit b/d
By commission received
By discount received
By interest received
By rent received
By sundry incomes

XXX
XXX
XXX
XXX
XXX
XXX




XXX
It is prepared to ascertain any of the following:
1. sundry expenses
2. sundry incomes

PREPARATION OF FINAL ACCOUNTS UNDER DOUBLE ENTRY SYSTEM
With the help of information provided and ascertained, Trading account and Profit & loss account and
Balance sheet of the concern at the end of the year will be prepared.

Calculation of Profit on cost and sales:
Based on the information provided in the problem, percentage of profit on cost must be converted into
percentage of profit on sales or vice versa.
Conversion table
Profit on cost Profit on sales
1/2 or 50% 1/3 or 33 1/3 %
1/3 or 33 1/3 % 1/4 or 25%
1/4 or 25% 1/5 or 20%
1/5 or 20% 1/6 or 16.67%
1/6 or 16.67% 1/7 or 14.29%
1/7 or 14.29% 1/8 or 12.5%
1/8 or 12.5% 1/9 or 11.11%
1/9 or 11.11% 1/10 or 10%