Single-entry bookkeeping system
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.
Most businesses maintain a record of all transactions based on the double-entry bookkeeping system. However, many smaller 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.
Single-entry systems are used in the interest of simplicity. If a double-entry system is needed, then the services of a trained person are often required.
According to the 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.
Additionally, the IRS states:
- The single entry system of record keeping does not include equal debit and credit 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.
- 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.
- A single-entry system for a small shell and ledgers show debit and credit balances.
- Data may not be available to management for effectively planning and controlling the business.
- Lack of systematic and precise bookkeeping may lead to inefficient administration and reduced control over the affairs of the business.
- Single-entry record administration of those assets may occur.
- Theft and other losses are less likely to be detected.
- IRS Publication 583: Starting a Business and Keeping Records