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During 700 B.C., the practice of book-keeping was started with the invention of money in Lydia, Greece. There were different types of the recording system which were used for recording the financial transactions at that period. As the change in time and increase in the volume of financial transaction, the traditional type of accounting system was unable to fulfill the complete purpose of accounting so, the new and modern accounting system was gradually developed to maintain an a systematic record of the financial transaction.

The accounting system can be classified as follows:

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Single Entry System

Single entry system is the type of accounting system which does not have any fixed set of rules and principles for recording the financial transaction and does not follow the basic principles of accounting as well. This system maintains the record of cash and personal accounts only but ignores the transactions of real and nominal accounts. It does not have any specific rules and principles for the preparation of the accounts which is also known as accounting for incomplete records.

The following are the main definitions of single entry system:

“Single entry system is a system of book- keeping in which, as a rule, the records of only cash and personal accounts are maintained. It is always incomplete double- entry system varying with circumstances.” - Kohler

“Single- entry system is a method employed for recording transactions, which ignores the two-fold aspects and consequently, fails to provide the business man with information necessary for him to be able to ascertain the position.” – R. N. Carter

From the above-defined definitions, we can be clear that single entry system is that type of book-keeping which does not have any specific rules and principles for recording the financial transactions. It usually maintains only the transactions related to cash book and personal accounts of debtors and creditors and ignores the real and nominal accounts.

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Double Entry System

After the failure of the single entry book-keeping system, a new and modern organized system was introduced which is known as double entry system. Double Entry system is defined as the accounting system in which every financial transaction is separated under two account heads: debit and credit. It explains that there are two-fold effects of every financial transaction. Both account heads must be equal to each other i.e.Debit = Credit.

Some of the definitions of double entry system of book-keeping are:

"The specific technique which reflects the concept of duality is known as double entry book- keeping." -Lewis and Gillespie

"Double entry system is the system under which each transaction is regarded to have two-fold aspects and both the aspects are recorded to obtain the complete record of dealings."- Juneja, Chawla, and Saksena

From the above definition, we can say that double entry system is regarded to be the most systematic and scientific system under which every financial transaction is recorded in two separate accounts with the equal amount to determine the true financial position of the business.

Features

Some of the main features of double entry system of book- keeping are as follows:

  1. Double effect
    The double entry system of book- keeping shows every transaction under the double effects i.e debit and credit. It records each financial transaction into two different accounts on two opposite sides.

  2. Equal effect
    Every financial transaction affects the two different account heads with the equal amount. Both the debit as well as credit side is affected by the equal amount.

  3. Debit and Credit
    The double entry system provides two aspects of each transaction under 'Debit' and 'Credit'. One of the two aspects is debited and another is credited in the book of accounts.

  4. Scientific
    The double entry system is considered to be a scientific system of book keeping. It has its own rules and principles for recording the financial transactions and preparing the financial statements.

  5. Complete record
    The double entry system book-keeping system maintains all the records into three account heads: Personal Account, Real Account and Nominal Account. It helps to identify the accurate financial position of a business organization.

Advantages

  1. It helps to record the financial transaction in a systematic and scientific manner.
  2. It helps in preparing the trial balance to check arithmetical accuracy of books of accounts.
  3. It facilitates for making an audit of the books of accounts of the organization.
  4. It helps in ascertaining the financial position of the business by preparing trading and profit/ loss account and balance sheet.
  5. It provides the required financial information to the concerned party for making plans, policies, and decisions.

  • Single entry system is that type of accounting system which has no fixed set of rules and principles for recording the financial transaction. 
  • Single-entry system is also known as accounting for incomplete records. 
  • Double entry system emphasizes that every financial transaction has two aspects.
  • The double entry system maintains records showing double effect of each financial transaction.
  • The double entry system is a scientific system of book keeping. 
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Very Short Questions

The following are the objectives of double entry system:

  1. To maintain the systematic record of financial transactions.
  2. To solve the problems arises on financial matters.
  3. To provide financial information to the management for making financial plans and decisions.
  4. To determine the financial position of a business on a particular date.
  5. To determine the amount of profit or loss of a business during a period of time.

The following are the main features of double entry system of book keeping:

  1. Double effect: The double entry system maintains records showing double effect of each financial transactions. It makes record of each financial transaction into two different accounts on two opposite sides.
  2. Equal effect: Every financial transaction affects in two different accounts with equal amount. The debit side as well as credit side of two different accounts is affected by an equal amount.
  3. Debit and Credit: The double entry system provides two aspects of each transaction with the names '˜Debit 'and 'Credit'. The one aspect of the transaction is debited and another is credited in the books of accounts.
  4. Scientific: The double entry system is a scientific system of book keeping. It has own rules and principles for recording financial transactions and preparing financial statements.
  5. Complete record: The double entry system book keeping system maintains records in all personal and impersonal accounts. Such complete record of financial transactions helps to identify the actual financial position of a business organization.

The following are the advantages of double entry system:

  1. It helps the record of financial transaction in a systematic and scientific manner.
  2. It helps to prepare trail balance to check arithmetical accuracy of books of accounts.
  3. It facilitates for making audit of the books of accounts.
  4. It helps to ascertain the financial position of the business by preparing trading and profit/ loss account and balance sheet.
  5. It provides the financial information to the management for making plans, policies, and decisions.

The following are the disadvantages of double entry system:

  1. It is an expensive system because a number of books are required to maintain.
  2. It is not suitable for small business having limited number of transactions.
  3. It consumes more time for recording the financial transactions and preparing different statements.
  4. It requires trained and qualified person for making record of the financial transactions.

The differences between single entry system and double netry system are as follows:

S.N Single Entry System Double Entry System
1 Not based on the concept of duality. Based on the concept of duality.
2 Maintain the cash book and personal account of debtorsd and creditors. Maintains personal, real and nominal accounts.
3 It does not maintain nominal account so it cannot help to ascertain true profit or loss of the business. it can help to ascertain true profit or loss of the business.
4 It cannot help to prepare trial balance. It can help to prepare trial balance.
5 It is suitable for small businesses. It is suitable for large businesses
6 It is not acceptable for tax purpose. It is acceptable for tax purpose.

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  • The practice of book keeping was started with the invention of money in ______.

    Lydia, Greece


    Kathmandu, Nepal


    Beijing, China


    New York, USA


  • The practice of book keeping was started during ______.

    900 B.C.


    1200 A.D.


    1500 A.D.


    700 B.C.


  • “Single entry system is a system of book- keeping in which, as a rule, the records of only cash and personal accounts are maintained. It is always incomplete double- entry system varying with circumstances.” Who gave this definition?

    Kohler


    J.R. Batliboi


    R. N. Carter


    A.N. Anthony


  • “Single- entry system is a method employed for recording transactions, which ignores the two fold aspects and consequently, fails to provide the business man with information necessary for him to be able to ascertain the position.” Who gave this definition?

    Kohler


    A.N. Agrawala


    R. N. Carter


    A.N. Anthony


  • "The specific technique which reflects the concept of duality is known as double entry book- keeping." Who gave this definition?

    Kohler


    Juneja, Chawla and Saksena


    Lewis and Gillespie


    R. N. Carter


  • "Double entry system is the system under which each transaction is regarded to have two fold aspects and both the aspects are recorded to obtain complete record of dealings." Who defined it?

    Kohler


    Juneja, Chawla and Saksena


    A.N. Agrawala


    R.N. Carter


  • Which one of them is the feature of double entry book-keeping system?

    Complete record


    Scientific 


    All the options are correct


    Double effect


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