Single entry system.pdf

Single entry system is a system of accounting which does
not follow the double entry system. Under this system
only the accounts related to debtors and creditors are
maintained. It is mixed up by both business transactions
and personal transactions. Real accounts and nominal
accounts are ignored. Single entry system is also known
as accounts from incomplete records.
According to Kohler, “ single entry system is a system of
bookkeeping in which As a rule only records of cash and
personal accounts are maintained. It is always
incomplete double entry wearing with circumstances”
Objectives of single entry system
1. To record business transactions
2. To open accounts and to obtain the balances
3. To prepare a trial balance
4. To ascertain the profit or loss of a business
5. To ascertain the financial position of a business.
Features of single entry system
 It does not follow strict double entry system.
 It is an incomplete, inaccurate,unscientific,
unsatisfactory and unreliable system of bookkeeping.
 It is flexible.
 It is suitable to small concerns

1. FINANCIAL ACCOUNTING
Prepared by
Ranjitha. K.A
Assistant professor
Dept of commerce (IB)

2. SINGLE ENTRY SYSTEM OF ACCOUNTING
Meaninganddefinitionofsingleentry
Singleentrysystemisasystemofaccountingwhichdoes
notfollowthedoubleentrysystem.Underthissystem
onlytheaccountsrelatedtodebtorsandcreditorsare
maintained.Itismixedupbybothbusinesstransactions
andpersonaltransactions.Realaccountsandnominal
accountsareignored.Singleentrysystemisalsoknown
asaccountsfromincompleterecords.
AccordingtoKohler,“singleentrysystemisasystemof
bookkeepinginwhichAsaruleonlyrecordsofcashand
personalaccountsaremaintained.Itisalways
incompletedoubleentrywearingwithcircumstances”.

3. Objectives of single entry system
1.To record business transactions
2.To open accounts and to obtain the balances
3.To prepare a trial balance
4.To ascertain the profit or loss of a business
5.To ascertainthe financial position of a business.
Features of single entry system
It does not follow strict double entry system.
It is an incomplete,inaccurate,unscientific,
unsatisfactory andunreliable system of bookkeeping.
It is flexible.
It is suitable to small concerns

4. It does not provide complete picture of each and every
transaction.Hence it is called defective double entry
system.
It maintains personal accounts and cash accounts.It
avoids real and nominal accounts.
The system differ from form to form it is an
adjustment of double entry system according to
convenience of the business.
Advantages or Merits of single entry system
It is a simple method of accounting.
It is less costly and economical.
It is suitable for small Enterprises.
It is possible to record transactions quickly.
It is highly flexible.

5. Limitations or demerits of single entry system
It is incomplete,unscientific and unsystematic.
Trial balance cannot be prepared.Hence arithmetical
accuracy cannot be checked.
Nominal accounts are not maintained.Hence true
profit or loss cannot be ascertained.
It does not keep a record of all Assets and liabilities.
Therefore a balance sheet cannot be prepared to know
the financial position of the business.
It is not suitable for large concerns.
It is not acceptable to Income Tax authorities.
It is difficult to detect errors and frauds, because
accounts are incomplete.
It is difficult to value the Goodwill of the business at
the time of sale of existing business.

6. Types of single entry system
There are three types of single entry system.They are as
follows:
1.PureSingle entry system:Under this system, no
subsidiary books are maintained.Only personal
accounts of debtors and creditors are maintained.
2.Simple single entry system:Under this system
cash books and personal accounts of debtors and
creditors are maintained.Other subsidiary books are
not maintained.
3.Quasi single entry system:Under this system
personal accounts,cash book and some subsidiary
books are maintained.

7. Ascertainment of profit or loss
There are two methods of calculating profit or loss under
single entry system.They are:
1.Statement of affairs method or net worth method or
capital comparison method.
2.Conversion method.
Statement of affairs method or net worth method
Under this method profit is ascertained by comparing
the capital at the beginning and the capital at the end of
an accounting period.
Profit =Closing capital –Opening capital

8. Accordingtothismethod,theprofitorlossmadebythebusinessiscomputed
bycomparingthecapitalofthebusinessontwodifferentdates.The
followingprocedureisfollowed:
1)Astatementofaffairsatthebeginningoftheyearispreparedtoascertain
capitalatthebeginning.
2)Closingstatementofaffairsispreparedtoascertaincapitalattheend.
3)Profitcanbeascertained:
Statement of profit or loss
Particulars
Capital at the end(closing capital)
Add:Drawings
Less: Additionalcapital introduced
Adjusted capital at the end
Less: Capital atthe beginning(Opening
capital)
Profit made during the year
Amount
xxx
xxx
xxx
xxx
xxx
xxx

9. Format of Statement of affairs method
Statement of Affairs as at….
Liabilities
Sundrycreditors
Bills payable
Outstandingexpenses
Bank overdraft
Capital(Balancing
figure)
Amount
xxx
xxx
xxx
xxx
Xxx
xxx
Assets
Cash in hand
Cash at bank
Sundry Debtors
Bills Receivable
Stock in trade
Prepaid expenses
Furniture
Land & Building
Machinery
Amount
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx

10. Difference between profit and loss A/cand
statement of profit and loss.
Profit and loss A/cStatement of profit and
loss
•Itisanaccount.
•Itispreparedunderdouble
entrysystem.
•Itstartswithgrossprofitor
loss.
•Itshowstheexactprofitor
loss.
•Itispreparedfromledger
accountbalancesonly.
.Ittakesintoaccountpurchase,
salesandallexpensesand
incomeforascertainingprofit
orloss.
•Itisastatement.
•Itispreparedundersingle
entrysystem.
•Itstartswithclosingcapital.
•Itdoesnotshowthatsat
profitandloss.
•ItispreparedPartlyfrom
ledgeraccountbalancesand
partlyfrom estimates,
physicalverification.
•Ittakesintoaccountclosing
andopeningcapitalsfor
ascertainingprofitorloss.

11. Difference between statement of affairs and
balanceSheet
Statement of affairs Balance sheet
•Itispreparedundersingleentry
system
•Thevaluesofassetsand
liabilitiesshowninthis
statementaretakenpartlyfrom
theactualrecordsandpartly
fromestimates.
•Thefinancialpositionasshown
bythisstatementisnotreliable
•Itispreparedtofindoutcapital
andprofitorloss
•Itispreparedbythesmall
concernswhichhaveveryfew
transactions
•Trialbalanceisnotprepared
beforeitspreparation
•Eachispreparedunderdouble
entrysystem
•Thevaluesofassetsand
liabilitiesSeaninhisstatement
aretakenfromactualrecords
only.
•Thefinancialpositionasshown
bythisstatementisreliable
•Itispreparedtoascertainthe
financialposition
•Itispreparedbythebig
concernswhichhavelarge
numberoftransactions.
•Trialbalanceispreparedbefore
itspreparation.

12. Problem 1
Find out profit from the following data
Capital at the beginning of the year 8,00,000
Drawings during the year 1,80,000
Capital at the end of the year 9,00,000
Capital introduced during the year 50,000

13. Solution:
Statement of profit
Particulars
Capitalat the end
Add: Drawings
Less: Additional capital introduced
Less: Capital at the beginning
Net profit
Amount
9,00,000
1,80,000
10,80,000
50,000
10,30,000
8,00,000
2,30,000

14. Problem 2
Mr.AcommencedbusinesswithacapitalofRs.12000on
1
st
January2019.Subsequentlyheintroducedfurther
capitalofRs.5000.Duringtheyear,hehaswithdrawnRs.
2000forhispersonaluse.On31-12-2019,hisassetsand
liabilitieswereasfollows:
Cashatbank 3000
Debtors 4000
Stock 16000
Furniture 2000
Creditors 5000
Calculateprofit/lossmadeduringtheyear2019.

15. Solution:
Calculationofclosingcapital
Statement of affairs of Mr. A as on 31.12.2019
Liabilities
Creditors
Capital (Bal.fig)
Amount
5000
20,000
25000
Assets
Cashat bank
Debtors
Stock
Furniture
Amount
3000
4000
16,000
2,000
25000

16. Statement of profit /loss for the year 31.12.2019
Particulars
Closingcapital
Add:Drawings
Less:AdditionalCapital
Less:Openingcapital
Net profit
Amount
20,000
2000
22000
5000
17000
12000
5000

17. Problem no: 3
Mr. Manokeeps his books of accounts under single entry system.
During the year he introduced additional capital of Rs. 20000.His
financial position on 31-12-2019 and 31-12-2020 was as follows:
From the above particulars, you are required to prepare a statement of
profit and loss for the year ended 31-12-2020.
Particulars 31-12-2019 31-12-2020
Cash 9860 800
Stock in trade 38520 57020
Plant& Machinery 54420 61000
Bills Receivable - 16480
Sundry debtors 24840 43940
Sundry creditors 72040 80000
Furniture 4960 5220
Drawings - 5000

18. Solution:
Calculation of capital at the beginning
Liabilities
Sundrycreditors
Capital(Bal.fig)
Amount
72040
60560
132600
Assets
Cash
Stock in trade
Plant& Machinery
Sundry debtors
Furniture
Amount
9860
38520
54420
24840
4960
132600
Statement of affairs as on 31-12-2019

19. Calculation of capital at the end
Liabilities
SundryCreditors
Capital(Bal.fig)
Amount
80000
104460
184460
Assets
Cash
Stock in trade
Plant& Machinery
Sundry debtors
Furniture
Bills Receivable
Amount
800
57020
61000
43940
5220
16480
184460
Statement of affairs as on 31-12-2020

20. Statement of profit/loss for the year ended 31-12-2020
Particulars Amount
Closing capital
Add:Drawings
Less: Additional capital
Less: Opening capital
Profitmade during the year
104460
5000
109460
20000
89460
60560
28900

25. Conversion method or Final Accounts Method.
(Conversion of Single Entry into Double Entry)
The conversion method involves converting accounting
from a single-entry system to a double-entry system.
Objectives of Conversion:
1.To find out correct profit.
2.To find out true and fair financial position of
business.
3.To make accounting ideal and reliable.
4.To measure accuracy of accounting records.
5.Toovercome the defects of the single entry system.

26. STEPS IN CONVERSION:
Ascertaining Missing information:
a. Preparation of opening statement of affairsto find out
opening capital
b. Preparation of B/R Account:Find out B/Rreceivedduring
the year.
c. Preparation of B/P Account:Findout B/Pissued during the
year.
d. Debtors Account:Find out opening debtorsor closing
debtors or cash received from debtors or credit sales.
e. Creditors Account:Find out opening creditors or closing
creditors or cash paid to creditors or credit purchase.
f. Memorandum cash account.
g. Memorandum trading account.
h. Profit and loss account.

27. Ascertainment of sales:Sales includes cash sales and
credit sales.
Total sales =Cash sales +Credit sales
CreditsalescanbefoundbypreparingTotalDebtorsA/c.
Proformaof Total Debtors Account
Particulars
Amount
Particulars Amount Particulars Amount
To Balance b/d(Opening
balance ofdebtors)
xxxBy Cash( Received from
debtors)
xxx
To Bills receivable
(Dishonoured)
xxxBy B/R received xxx
To Cash refund to debtorsxxxBy sales return/Return
inwards
xxx
To Credit sales (Bal.fig)xxxBy Bad debts xxx
By Discount allowed xxx
By Balance c/d (Closing
balanceof debtors)
xxx
xxx

28. Egproblem:
From the following data, ascertain total sales:
Balanceof debtors on 1-1-201924000
Sales returnsor Return inwards10000
Cash received from customers 90000
Discount allowed 6000
B/Rreceived 34000
Bad debts. 3000
B/Rdishonoured. 7000
Balance of debtorson 31-12-201920000
Cash sales. 50000

29. Solution:
TotalDebtors A/c
ParticularsAmount ParticularsAmount
To Balance b/d 24000 By Cash 90000
To B/R
Dishonoured
7000 By Discount
allowed
6000
To Credit
sales(Bal. fig)
132000 By B/Rreceived 34000
By Bad debt 3000
By sales returns 10000
By Balance c/d 20000
163000 163000

30. Total sales=Cash sales +Credit sales
=50000+132000=182000
Ascertainment of purchases:Purchases include
cash purchases and credit purchases.
Total purchases =Cash purchases +creditPurchases
Credit purchase can be ascertained by preparing Total
CreditorsAccount.

31. Proforma of Total Creditors A/c
Particulars Amount Particulars Amount
To cash (Paid to
creditors)
xxx By Balanceb/d xxx
To B/P given or issued xxx By B/P
(Dishonoured)
xxx
To Discount Received xxx By Credit purchase
(Bal.fig)
xxx
To Purchase Return or
Return outward
xxx
To Balance c/d xxx
xxxx xxxx

32. EgProblem:
From the following information, ascertain total
purchases:
Balance of creditors on 1-01-2019. 14000
Cash paid to creditors. 10000
B/Pgiven or Bills accepted. 10000
Discount received 500
Return outward or purchase return. 3000
Creditors as on 31-12-2019. 25000
Cash purchases. 10000

33. Solution:
Total creditors A/c
Total purchases=Cash purchases+credit purchases
=10000+34500=44500
ParticularsAmount ParticularsAmount
To cash 10000 By balance b/d 14000
To B/P 10000 To credit purchase
(Bal. fig)
34500
To Discount
Received
500
To Return outward 3000
To Balance c/d 25000
48500 48500

34. Ascertainment of bills receivable:by preparing bills
receivable account we can find out bills receivable at
the beginning or at the end or bills receivable received
during the year.
Proformaof Bills Receivable A/c
Particulars Amount Particulars Amount
To Balance b/d(Opening
balance)
XXX By cash received against
bills
XXX
To Sundry Debtors
(B/Rreceived during the
year) (Bal. Fig)
XXX By Sundry Debtors
(B/Rdishonoured)
XXX
By Balance c/d(Closing
balance)
XXX
XXX XXX

35. Ascertainment of bills payable:by preparing bills
payable account we can find out the missing figures
such as bills payable at the beginning, bills payable at
the end and bills payable issued during the year.
ProformaofBills payable A/c
Particulars Amount Particulars Amount
To cash paid on bills XXX By Balance b/d(Opening
balance)
XXX
To Sundry creditors (B/P
dishonoured)
XXX By Sundry creditors(B/P
issued or acceptance)(Bal.
Fig)
XXX
To Balance c/d(Closing
balance)
XXX
XXX XXX

36. EgProblem1
Calculate Total Sales from the following
information:
Bills Receivables as on 1st April, 2017 –Rs.7,800
Debtors as on 1st April, 2017 –Rs.30,800
Cash received on maturity of Bills Receivable during
the year –Rs.20,900
Cash received from Debtors –Rs.70,000
Bad Debts written off –Rs.2,800
Returns Inward –Rs.8,700
Bills Receivable dishonoured–Rs.1,800
Bills Receivable on 31st March, 2018 –Rs.6,000
Debtors as on 31st March, 2018 –Rs.25,500
Cash Sales during the year –Rs.40,900

37. Solution:
Bills Receivable A/c
Total Debtors A/c

38. Total sales =Cash sales +credit sales
=40900+95300
=1,36,200
Eg Problem 2
From the following details find out the credit purchases
and total purchase.

39. Bills payable A/c
Total Creditors A/c

40. Total purchases =Credit purchases +Cash purchases
=30800+29000
=59800.