Question

Explain the difference between Single Entry System and Double Entry System.

Answer 1

Difference	Single Entry System	Double Entry System
1. Meaning	A system of accounting that records one aspect or effect of each transaction either a debit or a credit, is called Single Entry System of book-keeping.	A system of accounting that records dual aspects or effects of every business transaction is called Double Entry System of book-keeping.
2. Effect of transaction	Every transaction does not have two effects.	Every transaction has twc effects.
3. Ledger accounts	Only personal accounts and cash accounts are opened in the ledger.	All types of accounts are maintained/ opened in the ledger.
4. Trial balance	Trial balance cannot be prepared.	At the end of the year, trial balance can be prepared.
5. Profit or Loss	True profit or loss cannot be known. Only an estimate of profit or loss can be arrived at.	By preparing profit and loss account correct profit or loss can be ascertained.
6. Financial position	Balance sheet cannot be prepared for knowing the financial position of the business.	Balnace sheet can be prepared for knowing the financial position of the business.
7. Adjustments	In this system, adjustments are not considered.	In this system, adjustments are considered.
8. Suitability	It is suitable and convenient to small traders.	It is more suitable and convenient for all types of business organisations /traders.
9. Manipulation	It is difficult to detect fraud or manipulation in this system.	In this system, frauds or manipulation can be detected and prevented.
10. Information	As this system is incomplete, necessary information is not available.	This system being complete, necessary information is available.
11. Authenticity	This system is not considered as authentic by the court, government and tax authority.	This system is accepted as authentic by the court, government and tax authority.
12. Reliability	This system is not reliable because it is incomplete. So it is not valid for taking loan, insurance and for tax purposes by government authorities.	This system is reliable because it is complete. So it is valid for taking loan, insurance and for tax purposes by government authorities.
13. Errors	In this system errors cannot be detected easily.	Errors can be detected and prevented easily.
14. Decision making	Due to insufficient record of information, important decisions cannot be made.	Due to sufficient record of information, important decisions can be made.
15. Rules	Under this system, while recording the business transactions in the books of accounts no specific set of rules are followed.	Under this system, while recording the business transactions in the books of accounts, rules of double entry system are strictly followed.
16. Cost	This system is less costly.	This system is comparatively more costly and expensive.
17. Control	As system is incomplete, it is not possible to keep control over activities of business.	As system is complete, it is possible to keep control over various activities of the business.