Emerald’s

Degree College

SINGLE ENTRY SYSTEM

Definition: Single entry system means, “A system of book keeping, in
which as a sale, only records of cash and personal accounts are
maintained.”
Limitations:
1. It is not possible to prepare trial balance, as the dual aspect of
each transaction is not recorded.
2. Trading and profit and loss account cannot be prepared of as the
nominal accounts are not maintained. As result true profit or loss
is unknown.
3. True financial position of the finance cannot be known, because
the balance sheet cannot be prepared as the real accounts are
not maintained.
4. Tax authorities I.e. income tax GST doesn’t accept incomplete
seconds.
5. Possibility of committing thefts ad frauds by the employees,
because interval check is not possible.
6. In the absence of reliable records, it is difficult the raise loans
from banks and other financial agencies.

Single Entry Vs. Double Entry:

Double Entry Single Entry

1. It is a perfect and complete system 1. It is incomplete system of book-
of book-keeping keeping. It is a crude form of book-
keeping
2. Two fold aspect of the transaction is 2. In most of the cases only one
recorded. aspect of the transaction is recorded.
3. Personal, Real and Nominal 3. Only personal accounts are
accounts are maintained in the ledger. maintained besides cash book.
4. Since two fold aspect of the 4. Since only one aspect of the
transaction is recorded a Trial Balance transaction is recorded the Trial
can be easily prepared. Balance cannot be prepared.
5. By preparing Trial Balance 5. Since Trial Balance cannot be
arithmetical accuracy of the books can prepared arithmetical accuracy of the
 Emerald’s
Degree College
be tested. Entry books cannot be tested.
6. By preparing the statement of 6. Profit can be ascertained by
affairs the financial position is found preparing a Profit and Loss account.
out in an approximate way. To ascertain true and fair financial
position, a Balance Sheet can be
prepared.
7. Errors can be easily detected and 7. Errors cannot be detected and
rectified. rectified easily.
8. There are no hard and fast rules in 8. There are certain hard and fast
preparing the accounts. rules; one has a follow scrupulously
in preparing accounts.
9. Due to legal provisions, it is a must 9. Sole traders, partnership firms
on the part of limited companies to generally maintain their books under
follow the principles of Double entry. this system.

Statement of Affairs:
Statement of affairs is a statement that displays assets and
liabilities, but not as detailed as the balance sheet. It shows the beginning and
ending balances at capital. If the capital at the end is more than the capital at
the beginning, the difference will be profit during the period and as the other
hand, if closing capital is less than the capital, the difference will be considered
as loss.
Statement of affairs is not part of financial statements. Values are most
likely estimates and the accuracy of the statement could be doubtful. It does not
have the level of accuracy that the balance sheet would.
 Emerald’s
Degree College
Format of statement of affairs
Statements of affairs of ……. as of ……….
Liabilities Rs. Assets Rs.
Sundry creditors xxx Cash in Hand xxx
Bills payable xxx Cash at Bank xxx
Outstanding expenses xxx Bills receivable xxx
Income received in advance xxx Sundry Debtors xxx
Overdraft xxx Stock xxx
Bank Loans xxx Expenses paid in advance xxx
Any other liability xxx Income outstanding xxx
Capital (Balancing figure) xxx Fixed Assets xxx
Any other assets xxx
xxx xxx

Distinction between statement of affairs and balance sheet:

Statement of Affairs Balance Sheet
1. It is prepared on the basis of It is prepared on the basis of
some ledger accounts and other ledger accounts.
information.
2. It will not give true financial It gives the true financial position
position of the firm. of the firm.
3. The capital will be the excess of Balance of capital Account is
assets over liabilities i.e. the taken from the ledger.
balancing figure of the
statement of affairs is treated
as capital.
4. It not only shows the financial It shows only the financial
position of the enterprise but Position.
also helps in the ascertainment
of profit or loss.
5. It is very difficult to find out the It is easy to find out the assets
assets and liabilities which are and liabilities that are omitted
omitted. because of disagreement of both
the sides of the balance sheet.