Subject: Principles of Accounting
Single entry book keeping system is that system of book-keeping under which financial transactions are recorded without considering dual aspect. This means only one aspect is affected while keeping the record of financial transactions. It is not possible for the small organization to keep a record of a transaction using double entry system. So, it is better for them to use single entry system because double entry system is expensive for small organization. This system helps to maintain only cash and personal account of debtors and creditors. The impersonal account like purchase accounts, sales accounts, wages account, rent account, etc. are ignored.
“The term single entry is applied to a style of book-keeping under which only the personal accounts of the debtors and creditors of the businessman are kept.” –J.R. Batliboi
Therefore, under single entry system every organization records receipts and payment as well as receivable and payable.
Basis | Single entry system | Double entry system |
Duality | Dual effect of each transaction is not considered in this system. | This system maintains the records by following the principles of the dual effect of each transaction. |
Types of account | In this system, only personal accounts are kept & impersonal accounts are avoided. | In this system, both personal and impersonal accounts are maintained. |
Financial position | It can’t show the true financial position. | It can show the true financial position. |
Organization | It is suitable for a small organization. | It is suitable for a large organization. |
Uniformity | It is unsystematic, incomplete & lacks uniformity. | It is scientific, complete & systematic. |
When accounts are kept under single entry system, profit made during the year is calculated by two methods. The methods are:
Thus, the procedure can be summarized as follows:
Step 1: Calculate the amount of opening and closing capital (net worth) by preparing statement of affairs.
Step 2: Adjust the capital at the end by adding a drawing and deducting additional capital during the year.
Step 3: From the adjusted capital at the end, deduct capital in the beginning. The difference is either a profit or loss.
The formula for determining net income (profit or loss of the year)
Profit or loss of the year = Capital at end + Drawing during the year – Additional capital – Opening capital |
Specimen for statement of profit and loss
Statement of profit or loss
As on year ended…………….
Particulars | Amount |
Capital at the end (closing capital) | XXX |
Total | XXX |
Adjusted capital | XXX |
Profit/Loss for the year | XXX |
References:
Sharma, Narendra et.al., Principles of Accounting-XI, Bundipuran Prakashan, Kathmandu
Koirala, Yadav Raj et.al., Principles of Accounting-XI, Asmita Books Publication, Kathmandu
Shrestha, Dasharaha et.al., Accountancy-XI, M.K. Prakashan, Kathmandu
Determination of profit under single entry system
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