AP.

01 SINGLE ENTRY SYSTEM

SINGLE ENTRY SYSTEM - Generally Accepted Accounting
Principle.
- A system of record keeping which the
- Accrued Income – item of income that is
transactions are not analyzed and
already earned but not yet collected.
recorded in the double entry framework.
- Accrued Expense – item of expense that
- Not a double entry system – duality of
is already Incurred but not yet paid.
transaction of events in Assets,
Liabilities and Capital.
- Common Records Used:
COMPARISON OF CASH BASIS OF
o Cash Books
ACCOUNTING AND ACCRUAL BASIS OF
 Cash Outflow
ACCOUNTING
 Cash Inflow
o Accounts Payable
o Accounts Receivable
1. SALES
o Property, Plant and Equipment
a. Cash Basis
SINGLE ENTRY METHOD i. Cash Sales
ii. Collection of Trade
- Computation in determining net income Accounts Receivable
or loss is simply to compare the capital iii. Collection of Trade
or retained earnings at the beginning of Notes Receivable
the year and capital or retained earnings b. Accrual Basis
at the end of the same year after taking i. Cash Sales
into consideration drawings or dividends ii. Credit Sales (Sales on
and additional investments. Account)
- Retained earnings increased during the 2. INCOME OTHER THAN SALES
period a. Cash Basis
o No dividends or drawings i. Includes only those
o No additional investments collected during the
period.
Increase in Retained Earnings –
b. Accrual Basis
Net income during the period
i. Includes those items
earned during the
period.
CASH BASIS OF ACCOUNTING

- System that recognizes revenue when 3. PURCHASES

cash is received and expenses when cash a. Cash Basis
is paid. i. Cash Purchase
- Not GAAP (Generally Accepted ii. Payment of Trade
Accounts Payable
Accounting Principle)
iii. Payment of Trade Notes
ACCRUAL BASIS OF ACCOUNTING Payable
iv. Payment in Advances to
- System that recognizes revenue when Suppliers
earned rather than when cash is received b. Accrual Basis
and recognizes expenses as it is incurred i. Cash Purchase
rather than when cash is paid. ii. Purchases on Accounts
4. EXPENSES
AP.01 SINGLE ENTRY SYSTEM
a. Cash Basis 6. Accumulated Depreciation
i. Includes only those 7. Rent Receivable/ Unearned Rent Income
expenses that are paid. 8. Prepaid Rent/Rent Payable
b. Accrual Basis 9. Capital
i. Includes those items 10. Retained Earnings
that are incurred 11. Net Assets
regardless of when paid.
5. DEPRECIATION
a. Cash Basis
i. Typically provided
except when the cost of
equipment was treated
as expense.
b. Accrual Basis
i. Depreciation is typically
provided.
6. BAD DEBTS ACCOUNTS RECEIVABLES/NOTES
a. Cash Basis RECEIVABLES/ADVANCES FROM
i. No Bad Debts Expense CUSTOMERS
is recognized since cash
basis does not recognize Beg. Balance – AR Bal. End – AR
receivables. Although Beg. Balance – NR Bal. End – NR
some problems may Bal. End – Advances Beg. Balance – Advances
give an indication that Sales on Account Sales Returns and Allowance*
the accounts written off Recoveries Sales Discounts
were charged to bad Collections incldg. Recoveries
Write-off
debts.
b. Accrual Basis
i. Doubtful accounts are
*Included only those Sales Returns and Allowance that
treated as bad debts.
are deducted from the Accounts Receivable. If the Sales
Return and Allowances arise from cash refund to
customer, it should not be included in the T-account of
T-ACCOUNTS APPROACH the receivables.

In order to compute for the cash payments or

collections for certain account, it is suggested ALLOWANCE FOR DOUBTFUL
that the T-account approach will be used on the ACCOUNTS
following:
Balance End Beginning Balance
1. Accounts Receivable/Notes Accounts written off Doubtful Accounts Exp.
Receivable/Advances from Customers Recoveries
2. Allowance for Doubtful Accounts
3. Accounts Payable/Notes
Payable/Advances to Suppliers ACCOUNTS PAYABLE/NOTES
4. Merchandise Inventory PAYABLE/ADVANCES TO SUPPLIERS
5. Property, Plant and Equipment
 AP.01 SINGLE ENTRY SYSTEM
Bal. End – AP Beg. Balance – AP
Bal. End – NP Beg. Balance – NP
Beg. Balance – Advances Bal. End – Advances
Purch. Ret and Allowance Purchases
Purch. Discount
Payments

MERCHANDISE INVENTORY

Beg. Balance Bal. End RENT RECEIVABLE/UNEARNED RENT

Net Purchase Cost of Sales INCOME
Beg. Balance - RR Balance End - RR
Balance End - URI Beg. Balance - URI
Rent Income Collection of Rent
NOTES:
 Using T-account, aside from the journal This T-account is also applicable to interest
entries, it follows the following formula receivable/unearned interest income, royalty
in the computation of the Cost of Sales: receivable/unearned royalty income and other
deferred assets.
Merchandise Inventory, Beg xx
Add: Net Purchases xx PREPAID RENT/RENT PAYABLE
Total Goods Available for Sale xx
Beg. Balance - PR Balance End - PR
Less: Merch. Inventory, End xx
Balance End - RP Beg. Balance - RP
COST OF SALES XX
Payment of Rent Rent Expense
 Net purchases is computed as follows:
Purchases on Account xx This T-account is also applicable to prepaid
Add: Cash Purchases xx salaries/salaries payable.
Gross Purchases xx
Add: Freight-in xx PROPERTY, PLANT AND EQUIPMENT
Less: Beg. Balance Balance End
Purch. Discount xx Cost of the Asset Acquired Cost of asset Derecog.
Purch. Allowance xx
Purch. Returns xx ACCUMULATED DEPRECIATION
NET PURCHASES XX
Balance End Beg. Balance
The T-account presented is applicable to AD of the Asset Derecognized Dep. Expense
finished goods inventory of merchandising
company. CAPITAL
Balance End Beg. Balance
 Net Sales is computed as follows: Withdrawal Additional Investment
Sales on Account xx Net Loss Net Income
Add: Cash Sales xx
Gross Sales xx When the owner withdrew merchandise
Less: inventories or other non-cash assets, the
Sales Returns and Allowances xx drawings account should be debited to an
Sales Discount xx amount equal to the cost, not the selling price or
NET SALES XX
AP.01 SINGLE ENTRY SYSTEM
fair value of the merchandise or non-cash asset
withdrawn.

RETAINED EARNINGS
Balance End Beg. Balance
PP Error PP Error
Net Loss Net Income
Div. Declared

NET ASSETS
Increase in Asset Decrease in Asset
Decrease in Liab Increase in Liab
Net Loss Increase in SC
Div. Declared Increase in SP
Net Income

This T-account follows the basic rule in making

journal entry that an account is increased
through its normal balance while it is decreased
at the other side of the normal balance, for
example increase in asset is debited which is
the normal balance of an asset while decrease
is credited which is at other side of the normal
balance.