Why is it difficult to ascertain the correct profit or loss under Single Entry system (Answer in one sentence)?
Answers
Answer:
Explanation:
Under the concept of single entry system, transactions are recorded through single entry and maintains only one side of each transaction. It is the oldest way of recording financial transactions which is primarily used in the income statement to record entries.
This system records transactions or business which are connected with external parties but ignores various important transactions which is essential in determining the financial status of the company.
It is difficult to ascertain arithmetical accuracy under this system as trial balance cannot be prepared due to lack of proper records under this system. It is because of this improper records, Profit and Loss Account cannot be prepared to ascertain the correct amount of profit or loss.
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