explain the merits and demerits of single entry system
Answers
Explanation:
Under this system, a Cash Book is prepared which shows the receipts and payments of cash transactions and no other ledger is maintained except a rough book for recording transactions relating to personal accounts. It is actually called ‘Pure Single Entry’.
Under this method, real accounts and nominal accounts are not recognised. In short, these transactions are only recorded in Cash Book without, however, applying the principles of double entry. That is why it is said: The system which does not totally follow the principles of Double Entry System is called Single Entry System’.
For recording transactions relating to personal accounts, however, double entry system is followed, say, when cash is received from a customer—it is recorded in Cash Book first and, thereafter, in the personal account of the customer concerned, i.e., recorded in two places—like double entry basis.
Again, no entry is recorded in the books of accounts for any internal transactions, like depreciation on assets. Therefore, it may be said that Single Entry System is nothing but an admixture of Single Entry, Double Entry, and no entry.
According to R. N. Carter, Single Entry cannot be termed as a system, as it is not based on any scientific system like Double Entry System. For this purpose, Single Entry is nowadays known as Preparation of accounts from incomplete records.
Advantages of Single Entry System
Main benefits or advantages of single entry system of book keeping can be expressed as follows:-
Simple and Easy Method Of Recording Transaction
Single entry system does not need any special accounting knowledge and personnel to record financial transaction of the business. It can be maintained easily by the business owner. So, this system of book-keeping is simple to maintain and easy to practice.