Systems Of Bookkeeping

What are Bookkeeping System

Bookkeeping system can be divided in to two types they are namely (1). Single entry system. (2). Double entry system.


1. Single Entry System

It may be defined as “any system which is not exactly the double entry system”. A business is said to be using single entry system, If it is not following complete the principles of double-entry system of book-keeping.

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

Single-entry systems, which are most commonly used in small business where the entity does not have many transactions, is a very informal type of system. The system will record the cash disbursements, Sales, Purchases and also cash receipts on accounts receivables. Anything else, Like equipment investments or stocks, Will be recorded only in the notes section of the program.

The basic single-entry system will only report to one single account when any transaction is recorded, hence the name. While this is very simplistic for those who are inexperienced with bookkeeping, It can present problems when you start to balance accounts or construct financial statements.

2. Double Entry System

The double entry system of book-keeping is recognized as the most scientific system of book-keeping. Every business transactions involves a transfer and as such consists of two aspects namely receiving aspect and giving aspect it is impossible to think one without other.

Ex: Goods sold for cash

  1. Business concern receive cash and
  2. Gives goods in return.

Advantages of Double-Entry System

  • It is helps to maintain a complete and accurate record for all business transactions.
  • The trader can know his debtors and creditors from time to time.
  • It provides ready made information to be sent to sales tax and income tax authorities.
  • It is helps to find out and prevent errors and frauds.