Q3-A) Businesses follow Single Entry System because it 

is simple to use and it does not

require background or training in accounting. Mostly, small firms use Single System because
they have few financial transactions per day, they do not sell on credit, they own few
valuable business-supporting physical assets and they mostly use uses cash basis
accounting, not accrual accounting.
However there are certain limitations to single entry system which includes:

 Complete information about a business cannot be obtained from Single Entry

System because it does not maintain complete records.
 Trial Balance cannot be tested without Double Entry.
 Balance Sheet cannot be drawn up because real account is not maintained.
Therefore, true financial position cannot be known.
 It is not possible to prepare a Profit and Loss Account as nominal accounts are
not maintained and so the source of profit or loss cannot be obtained.
 Comparison of business from year to year is not possible because statistical data
are absent.
 Value of intangible asset is ignored by the single entry system.
Above mentioned points are not just limitations of Single Entry but also advantages of Double
Entry System over Single Entry System. Trial balance, balance sheet and income statement can
all be prepared using Double Entry System as well as Profit/Loss can be measured. As all the
required data is present, businesses can easily calculate their performance as well as compare
their results with competitors or previous years.
Example of Single Entry System:
A household doing personal budgeting is a real life example of Single Entry System. They usually
only record date, description, value of transaction, whether it’s an income or an expense and
then the balance (cash in hand). They would generally use a register or a book to record these.

Q3-B) Flotation cost is defined as the cost incurred by the company when they issue new
stocks in the market as the process involves various stages and participants. It includes audit
fees, legal fees, accounting fees, investment bank’s share out of the issuance and the fees
to list the stocks on the stock exchange that needs to be paid to the exchange. Floatation
costs impact the amount of capital a company can raise by issuing shares.
For example if a company decides to go public limited and raise capital by offering shares in the
stock market, it has to deal with the flotation cost while offering shares in the market. Let’s
assume if a company offers each share for 20 rupees and the floatation cost is 5% then it would
be able to raise 19 rupees for each share it sells because 0.5 rupees is being paid as floatation
cost by the company.