Double Entry

System Vs Single
Entry
Prof. Rahul Ghosale
Assistant Professor
B.Com, MBA (Financial Management),UGC-NET,GDC &A,
Ph.D. (Pursuing)
Title and Content
• Double Entry System
• Single Entry System
Double Entry System
Definition
• Double Entry System refers to the system of bookkeeping that is prevalent at
present. According to this system, every transaction has equal and opposite
effects, in a minimum number of two accounts.
• In a nutshell, Double entry system of bookkeeping system double/Two
aspects are recorded in the books of entry
Introduction of Double Entry System
• Luca Pacioli

• Luca Pacioli (c. 1447 – 1517) was the first person to publish detailed material on the double-
entry system of accounting. The system was developed by an Italian Mathematician Luca
Pacioli, in the year 1494.

• debit comes from the word debitum, meaning "what is due," and credit comes
from creditum, meaning "something entrusted to another or a loan
Equation of Double Entry System
The system is based on the assumption that there won’t be any giving without
receiving. Hence, for every debit, there is a corresponding credit. Based on the
Double Entry System, the accounting equation can be expressed as:
•Owner’s Equity + Outsider’s Equity = Total Assets

Or

•Capital + Liabilities = Total Assets

Examples of Double-Entry System
 Double Entry Accounts Maintained System
1.Started Business with Cash Rs.10000 and Machinery Rs .40000

Particulars Debit Credit

Cash A/c INR 10,000
Machinery A/C INR 40,000
Capital A/c INR 50,000

2.Rent Paid Rs.2000 by Cash

Particulars Debit Credit
Rent A/c INR 2,000
Cash A/c INR 2,000
Characteristics of Single-Entry System
 Golden Rules Of Accounting
Golden Rules Of Accounting

Personal Account Impersonal Account

Natural Personal Account Real Account

Artificial Personal Account Nominal Account

Representative Personal
Account
Personal Account
1. Personal Account: Accounts that deals with persons, i.e. human beings and artificial judicial persons
such as companies, government organisations, HUF, etc.
o Natural Personal Account: Accounts that are concerned with natural human beings are called
natural personal account. It includes accounts of debtors, creditors, proprietor, etc.
o Artificial Personal Account: All the business concern has a separate legal identity in the eyes of
the law, and so the entities are different from its members. Therefore, the accounts of clubs,
charitable trust, company, bank, etc are covered under this category.
o Representative Personal Account: The accounts which represent persons or group thereof, are
called representative personal accounts, such as capital A/c, drawings A/c, prepaid A/c,
outstanding liability A/c.

Debit the receiver and Credit the giver

Impersonal Account
1. Real Account: Real accounts covers all the accounts related to firm’s assets. It
includes both tangible real account, such as cash A/c, building A/c, furniture
A/c, investment A/c, etc. and intangible real account, such as goodwill A/c,
patent A/c, intellectual property A/c.

Debit what comes in and Credit what goes out

Impersonal Account
Nominal Account: These are fictitious accounts, that are associated with expenses,
losses, revenues and gains of the firm, such as rent and rates account, travelling expenses
A/c, the commission received A/c, interest paid A/c.

Debit all expenses and losses;

Credit all incomes and gains
 Limitations of Double Entry

1. Not Suitable for Small businessman

2. Costly
3. No accuracy before making of trial balance
Single Entry System
Definition
• Any system of bookkeeping which is not a complete double entry system is
called Single entry system or Accounting For Incomplete Record.
• In other words, any account which do not contain a complete record (i.e., a
record of both the debit and credit aspects) of each transactions are called
accounts from incomplete records.
Suitability
• For small retailers
• For house holders
• For sole traders
• For small partnership firms with less transactions.
• Street Seller etc.
Examples of Single-Entry System
Single Entry Accounts Maintained System
 Characteristics of Single-Entry System

Suitability (Small)

Personal Accounts
Characteristics of
Single-Entry System
Maintenance of Cash Book

Final Accounts

Profit or Loss
 Types of Single-Entry System

Pure Single- • Personal Account Maintained

• Sales and Purchases, Cash in hand, and Bank
Entry System balance

Simple Single- • Cash book is maintained

• Cash received or paid
Entry System
Quasi Single • subsidiary books
• sales book, purchases book, bills receivable book
Entry System and bills payable book are maintained in addition
to cash book and personal accounts
 Limitations of Single Entry

1. Incomplete and unscientific method

2. Trial Balance cannot be prepared
3. Performance of the business cannot be ascertained
4. True financial position cannot be ascertained
5. Comparison with previous year’s performance is not possible
6. Unacceptable to tax authorities
7. Difficulty in obtaining loan
8. Difficult to locate frauds
9. Difficult to determine the price of the business
 Difference between single entry system and double
entry system
Point Double entry system Single entry system

Recording of Both the aspects of each and every Both the aspects of each and every
Transaction transaction is recorded transaction is not recorded.
Method It is complete, scientific, satisfactory It is not a complete, scientific, satisfactory
and reliable system of accounting. and reliable system of accounting.

Types of All types of accounts i.e., personal, All types of accounts are not maintained.
Accounts nominal and real accounts are Only personal account and cash account are
maintained kept

Capital The capital of the proprietor is The excess of assets over liabilities is taken
ascertained from the capital account as capital.
maintained in the ledger.

System/Cost The system is difficult and costly. The system is simple and less costly.