Single-entry bookkeeping

A single-entry bookkeeping system or single-entry accounting system is a method of bookkeeping relying on a one sided accounting entry to maintain financial information.

Overview

Most businesses maintain a record of all transactions based on the double-entry bookkeeping system. However, many small, simple businesses maintain only a single-entry system that records the "bare-essentials." In some cases only records of cash, accounts receivable, accounts payable and taxes paid may be maintained. Records of assets, inventory, expenses, revenues and other elements usually considered essential in an accounting system may not be kept, except in memorandum form. Single-entry systems are usually inadequate except where operations are especially simple and the volume of activity is low.

This type of accounting system with additional information can typically be compiled into an income statement and balance sheet by a professional accountant.

Advantages

Single-entry systems are used in the interest of simplicity. They are usually less expensive to maintain than double-entry systems because they do not require the services of a trained person.

According to the U.S. Internal Revenue Service: "A single-entry system is based on the income statement (profit or loss statement). It can be a simple and practical system if you are starting a small business. The system records the flow of income and expenses through the use of: 1. A daily summary of cash receipts, and 2. Monthly summaries of cash receipts and disbursements." (IRS Publication 583: Starting a Business and Keeping Records, 2007)

Additionally, in the Internal Revenue Manual 4.10.3.13.2 (03-01-2003), it is stated:"1. The single entry system of recordkeeping does not include equal debits and credits to the balance sheet and income statement accounts. A single-entry accounting system is not self-balancing. Mathematical errors in the account totals are thus common. Reconciliation of the books and records to the return is an important audit step. 2. A single-entry system may consist only of transactions posted in a notebook, daybook, or journal. However, it may include a complete set of journals and a ledger providing accounts for all important items. 3. A single-entry system for a small business might include a business checkbook, check disbursements journal or register, daily/monthly summaries of cash receipts, a depreciation schedule, employee wages records, and ledgers showing debtor and creditor balances."

Disadvantages

1. Data may not be available to management for effectively planning and controlling the business.
2. Lack of systematic and precise bookkeeping may lead to inefficient administration and reduced control over the affairs of the business.
3. Single-entry records do not provide a check against clerical error, as does a double-entry system. This is one of the most serious defects of single-entry systems.
4. Single-entry records seldom make provision for recording all transactions. In addition, many internal transactions, such as adjusting entries are often not recorded.
5. Because no accounts are provided for many of the items appearing in both the Income Statement and Balance Sheet, omission of important data is possible.
6. In the absence of detailed records of all assets, lax administration of those assets may occur.
7. Theft and other losses are less likely to be detected.

See also

• Dome Publishing, publishers of a popular pencil-and-paper modified-single-entry accounting system
• Internal Revenue Service, IRS Publication 583: Starting a Business and Keeping Records; and Internal Revenue Manual (03-01-2003)