Economics is a crucial part of any particular state, and there can be no economics without mentioning accounting in it. Accounting is not just a subject for students but also an art for people who use it to generate more and more profits. But the fact remains that accounting is not a piece of cake and one needs to be very careful while conducting it.
A double-entry system and a single entry system are two ways of doing accounting basically, and it is very important to know the differences between the two.
Double Entry System vs Single Entry System
The main difference between a Double Entry System and a Single Entry System is that the former is basically a system that records each type of transaction that occurs during a specific period of time, but on the other hand, the latter is another system that looks after a certain kind of transactions only and does not bother about all other activities.
The Double Entry System is basically a new method of accounting that is prevalent in the market these days. In this particular method, not just the credit entries are made but also the debit entries are made, and due to this particular feature, this accounting system becomes much more feasible for people that need to look at the accounts of the company as a whole.
But on the other hand, the single entry system, as the name itself suggests, looks after only a particular type of transaction only. For example, this accounting system may only look at the credit entries or may only look at the debit entries. While on one side, this system is very specific, it can be a bit difficult when all the transactions are needed to be highlighted for a specific purpose.
Comparison Table Between Double Entry System and Single Entry System
|Parameters of Comparison||Double Entry System||Single Entry System|
|Meaning||It is this system of keeping accounts of a company depending on all sides of transactions.||It is a system of keeping accounts of a company depending on single sides of transactions|
|Another name||Double-entry bookkeeping||single-entry bookkeeping|
|Nature||Complex nature||Simple nature|
|Used for||Organizations that operate on a higher-level||organizations that operate on a lower level|
|Errors||can be located easily||cannot be located easily|
|Tax purpose||Can be suitable for tax purposes||cannot be suitable for tax purposes|
What is Double Entry System?
In the year 1494, this particular system was said to have been developed by Luca Pacioli. This system, as the name itself suggests, simply denotes that whenever any transaction occurs during any business activity, it should be recorded in all the possible aspects. Usually, there exist two types of aspects of a business transaction, and hence according to this system, both of the aspects should be taken care of. This system can better be understood by the following example-
A person who buys ten kilos of grains in exchange for some cash basically conducts 2 transactions. In the first transaction, he gives them cash to another person and in the second transaction, he acquires 10 kilos of grains. Therefore, there is a transaction of credit, and there is a transaction of debt, and according to the double-entry system, both the transactions should be recorded simultaneously.
There are certain advantages and disadvantages attached to this particular system. As an advantage, it is very easy to find errors in this particular system as it happens to be very systematic, but as a disadvantage, it happens to be really complex that sometimes it gets difficult to even understand.
What is Single Entry System?
The single entry system is known to be the oldest system of keeping accounts in the history of mankind, and this is because of the simplest nature of this particular process that makes it accessible for all kinds of people without having technical knowledge of accounting. This system basically denotes that whenever any transaction takes place in any business activity, it should be recorded in only one format.
For example, if a person is buying some goods, then the transaction should either be recorded in a credit of goods, or it should be recorded in a debit of cash, and there should not be a mixture of both the transactions at the same place. This system follows the principle of simplicity and keeps the transactions as simple as possible for people to understand it by the very first look of it.
However, the system has a certain disadvantage of being too casual that there is a possibility of errors in it. Apart from this particular disadvantage, this system is mostly followed in a manner of being handwritten, and this is the main reason behind this system lagging in the race of accounting.
Main Differences Between Double Entry System and Single Entry System
- The double Entry System is a complex form of accounting, while on the other hand, the Single Entry System is a simple form of accounting.
- The double Entry System is also called double-entry bookkeeping, while on the other hand, the Single Entry System is also called single-entry bookkeeping.
- The double Entry System is a very suitable system for the purpose of tax, while on the other hand, the Single Entry System is not at all suitable for tax purposes.
- A double Entry System can locate errors easily, while on the other hand, a Single Entry System cannot locate errors easily.
- The double Entry System is suitable for big enterprises, while on the other hand, Single Entry System is suitable for small businesses.
Accounting is like an advanced dimension of mathematics as it not just involves equations but also involves crucial aspects of the economy of a particular business or a complete country. Therefore, it becomes very important to understand different aspects of accounting and exercise them in their particular manner so that no mistake is conducted while doing so.
A double-entry system and a single entry system are two basic types of doing accounting for a particular organization, and these two are very prevalent even in these times. But due to the apparent similarity in both of the terms, some people tend to confuse between these two concepts. But in reality, there is a huge gap between these two concepts, and multiple differences can be drawn between these two easily.