System of Accountancy

The accountancy is divided into two types of systems. One is Single Entry System
or Accounts of Incomplete Records or Incomplete Double Entry System and another
one is Double Entry System.
Single Entry System
It is a unscientific, incomplete, inaccurate system of
accountancy. Transactions are recorded in non dual aspect concept.
Dual Aspect Concept is not followed in single entry system.
Transactions are recorded in diaries or some of notes in single line.
At the year ending, they are collectively segregated and
summerised in Statement of Affairs to find out the closing capital. A
statement of Profit or loss is prepared to derive profit or loss from
closing capital.
Definition
According to Kohler, Single entry system is a system of
bookkeeping in which as the rules, only records of cash and personal
accounts are maintained. It is always an incomplete double entry
varying with circumstances.
Explanation
Single entry system is a system of art of bookkeeping. All
business transactions are recorded in the books of accounts.
In single entry system, only cash and personal accounts are
maintained and real and nominal accounts are not maintained.
This system is a n incomplete double entry system which is
variable in nature.
Feathers of single entry system
1) It is applicable for sole proprietor and partnership
Single entry system is unscientific system and incomplete
double entry system. It cannot be applied to corporate sectors. It is
applicable to small level business which has small level of
transactions comparing to corporate sectors.
2) Cash and Personal Accounts
Under single entry system, all transactions are recorded and
grouped under two accounts only. They are named as personal
accounts and cash accounts. Real account and nominal accounts are
not existed in this system but they are existed in double entry
system. Only the cash transactions and the credit transactions
which are dealing with persons are recorded in this system.
3) Transactions are not recorded completely

Under single entry system, transactions are recorded in

diaries, similar notes as single line. As they are keeping these style
of bookkeeping, some transactions can be omitted and missed
because insufficient method of recording.
4) No Uniformity
As like double entry system, Single entry system records all
transactions in the books of accounts but it does not follow
uniformity in recording and classifying the transactions. No proper
Journal or subsidiary books are kept and no ledger accounts are
maintained separately for every class of accounts.
5) Dependent on source document
The transactions recorded in the books of accounts in single
entry system are not accurate and reliable. No proper books of
accounts are maintained. To check the reliability of transactions
recorded in the books of accounts, source documents of such
transactions are to be verified. The recorded data in books of
accounts cannot be relied for accuracy of transactions.
Limitations of Single Entry System
1) Incomplete Records
Transactions are not recorded in dual aspect concept. There is
no equal amount of credit to every debit. Debit and Credit are not
existed in the system. The recording of transactions in this system is
incomplete, no equal debit to equal credit.
2) Financial position is not ascertained
Statement of Affairs is prepared to find out the closing
balance of capital in the final accounts of single entry system. The
balancing figure obtained by comparing the all liabilities except
capital with all assets of a business is treated as closing capital of
the business. Financial position is not revealed accurately in this
statement of affairs. Under double entry system, Balance sheet is
prepared in the final accounts. Balance sheet tallies all assets with
all liabilities exactly. The exact financial position can be ascertained.
3) Performance of business is not found
Under single entry system, statement of profit or loss is
prepared to know the profit or loss of a business. In statement of
profit, the profits are derived as a balancing figure resulted by
subtracting the opening capital from the closing capital and the
drawings are added with and additional capitals are subtracted from
closing capital. The profit is estimation but it is not exact result of
the business. Under double entry system, Trading and profit and loss
account is prepared. All accrued incomes are matched with the

accrued expenses and the result is treated as profit or loss of the

business. The profit is ascertained more exactly.
4) No accuracy of accounts
Trial Balance cannot be prepared in single entry system as it
is not following dual aspect concept. No debit and credit is treated in
this accounts. So all debit accounts cannot be matched with all
credit accounts while preparing Trial Balance. The accuracy of
accounts cannot be found because trial balance is not prepared.
5) No comparison between two accounting periods
Transactions recorded in single entry system is inaccurate so
it cannot be compared the transactions recorded between two
accounting periods. All transactions are not recorded genuinely so it
is not acceptable to compare the transactions between two
accounting periods.
6) Unacceptable by tax authorities
One cannot file his return of accounts by following single
entry system to the tax authorities. It is a unscientific method of
bookkeeping so it is not acceptable by tax authorizes.
7) Insufficient to detect frauds
If any frauds are committed in the books of accounts, it
cannot be found. An incomplete record of account does not provide
a platform to detect the frauds in the books of accounts. It is
unscientific, inaccurate so it is no possible to find the frauds by
following some systematic rules or practices.
Preparation of Final Accounts in Single Entry System
In single entry system, final accounts are prepared as statement
of affairs and statement of profit or loss as like p/l a/c and balance
sheet in double entry system.
Preparation of statement of affairs
All liabilities except capital are compared with all assets and the
result or balancing figure is treated as capital balance of a business.
Preparation of statement of profit or loss
Ascertaining opening capital by preparing statement of affairs for
opening capital. Last years transactions of assets and liabilities are
compared in statement of affairs and the closing capital is found.
Ascertaining closing capital by preparing statement of affairs for
current year data as like closing capital computation.
Ascertaining adjusted closing capital by adding drawings and
subtracting additional capital from closing capital.

 Preparing statement of profit or loss by subtracting the opening

capital from the adjusted closing capital.
STATEMENT OF AFFAIRS OF MY.X AS ON 31.03.2012 or 1.04.2011
LIABILITIES
Sundry Creditors
Bills Payable
Capital (opening or
closing) B/F

Total

RS.

ASSETS

RS.

Xxxx
Xxxx
xxxx

Sundry Debtors
Stock
Cash in Hand
Cash at Bank
Fixed Assets
Bills Receivable

Xxxx
Xxxx
Xxxx
Xxxx
Xxxx
xxxx

Xxxx

Total

xxxx

STATEMENT OF PROFIT OR LOSS OF MR.X DURING THE YEAR 2011-12

Closing Capital
xxxxx
Add: Drawings
xxxxx
xxxxx
Less: Additional Capital
xxxxx
Adjusted Closing Capital
xxxxx
Less: Opening Capital
xxxxx
Profit or loss
xxxxx