1. MODULE 1.1 – SINGLE ENTRY SYSTEM OF
BCM2B02 FINANCIAL ACCOUNTING
B. COM COURSE
UNIVERSITY OF CALICUT
Kohler defines Single Entry System as,
“A system of book keeping in which
as a rule only records of cash and of
personal accounts are maintained, it
is always incomplete double entry
varying with the circumstances.”
For certain transactions both the
aspects are recorded, for others only
one aspect is recorded and some
trasactions are even ignored.
i. Suitability : This system is suitable for small businesses such as sole trader or partnership
firm. Limited companies due to legal provisions, cannot maintain accounting books on Single
ii. Preparation of Cash Book : Generally, a Cash Book is prepared in this system in which
business as well as private transactions are mixed up.
iii. Preparation of Personal Accounts : Normally under this system, only personal
accounts are prepared and real and nominal accounts are avoided.
iv. No Uniformity : This system may differ from firm to firm, because same principles are
not followed by all the enterprises.
v. Requirement of Original Vouchers : Usually under this system, we have to depend on
originally vouchers for collecting the necessary informations.
vi. Preparation of Final Accounts : In the absence of all nominal and real accounts the
final accounts cannot be prepared easily. It is posible after converting the available
information into double entry system and missing amounts are determined then Trading &
Profit & Loss A/c can be prepared. The amount of all assets and all liabilities can also be
computed from incomplete records, but they are based on estimates. That is the reason that
the statement of assets and liabilities prepared under this system at the end of an accounting
period is called a Statement of Affairs instead of Balance Sheet.
4. Uses of Single Entry System
i. Simple Method : Single entry is a very simple method of recording business
ii. Less Expensive : It is less expensive when it is compared to Double Entry
System of book keeping.
iii. Suitable for Small Concerns : It is mainly suited to small business concerns
with limited number of transactions and very few assets and liabilities.
iv. No Need of Knowledge of Principles of Book Keeping : Under Single
Entry System, accounting records can be easily maintained as their maintenance
does not require knowledge of the principles of book keeping.
v. Easy to Ascertain Profit or Loss : Ascertainment of profit or loss in much
easier. To ascertain profit or loss, the proprietor has to compare the financial
position of business at the close of the accounting period with that at the beginning.
5. Limitations of
i. Arithmetical Accuracy Cannot be Proved
ii. No Control on Assets
iii. True Profits cannot be Known
iv. Financial Position of the Business cannot
v. No Internal Check
vi. Difficult to Ascertain the Business Value
vii. Inadequate for Planning and Control
viii. Incomplete and Unscientific System
ix. Comparative Study is Difficult
8. #1 – Pure Single Entry
In this, no information is available of sales, purchases, and cash and bank balances;
only personal accounts are considered. This method cannot be used in the
practical world since it does not provide any information regarding cash or the daily
#2 – Simple Single Entry
This account is kept based on a double entry system, but only two accounts are
considered, i.e., the personal and the cash account. Entries are made only from
these accounts, and no other account is considered.
#3 – Quasi Single Entry
Apart from the personal and cash accounts, other subsidiary accounts are
also maintained. The main ones being sales, purchases accounts, and bill books.
Discounts are also recorded in the personal account. Additional vital information like
wages, rent, salaries is also available. This method is adopted as a substitute to
double entry accounting system
9. Calculation of Profit/Loss
Preparing the Statement of Affairs as at
the beginning and as at the end of the
accounting period, called statement of
affairs or net worth method.
Preparing Trading and Profit and Loss
Account and the Balance Sheet by putting
the accounting records in proper order,
called conversion method.
10. A Statement of Affairs is a statement of all assets and liabilities.
The difference between the amount of the two sides is taken as capital.
The Statement of Affairs has two sides - the right-hand side for assets and
the left-hand side for liabilities.
To prepare the statement, information has to be collected from various
Information about assets will be available from the Cash Book, the
Personal Ledger, etc. The value of the Closing Stock will be ascertained
by preparing Stock Sheets and valuing the Stock in Hand, at lower of cost
and market value. If the trader has any other assets also, like furniture,
machinery, etc., the value will be ascertained and included among the
assets. The business is likely to have full knowledge of the amounts
owing to outsiders.
i. First, prepare
Statement of Affairs
at the beginning for
calculating capital in
ii. Then, prepare
Statement of Affairs
at the end in order to
calculate capital at
iii. Adjust the capital
at the end by adding
during the year.
iv. From the adjusted
capital at the end
deduct capital in the
difference is either a
profit or a loss.
12. Statement of Profit and Loss for the year
Closing capital XXX
Add: Drawings XXX
Less: Additional capital XXX
Adjusted capital XXX
Less: Opening capital XXX
Gross Profit/Gross Loss
during the year XXX
Bad debts XXX
Provision for doubtful debts XXX
Provision for discount on debtors XXX
Outstanding expenses XXX
Interest on capital XXX
Income received in advance XXX
Interest on bank loan XXX
Appreciation of assets XXX
Outstanding income XXX
Prepaid expenses XXX
Interest on drawings XXX
Net Profit/Net Loss XXX
14. Problem 2
Ram maintains books on Single Entry System. He gives you the following
Capital on April 1, 2013 60,800
Capital on April 1, 2014 67,600
Drawings made during the Period : April 2013 to March 2014 19,200
Capital introduced on August 1, 2013 8,000
You are required to calculate profit or loss made by Ram.
16. Problem 3
Rani who keeps her books on Single Entry System, tells
you that her capital on 31st March, 2014 was Rs. 18,700
and her capital on 1st April, 2013 Rs. 19,200. She
has withdrawn Rs. 8,420 for household purposes Rs.
8,420. She once sold her investment of Rs.2,000 at 2%
premium and brought that money into the business. You
are required to prepare a Statement of Profit or Loss.
18. Shan, keeps his books under Single Entry System. He provides you, the following information. Calculate Net Profit for the year
Capital on 1/4/2018 Rs.1,00,000 Additional capital during the year Rs.20,000
Capital on 31/3/2019 Rs.1,50,000 Outstanding salary Rs.8,000
Drawings during the year Rs.12,000 Prepaid insurance Rs.4,000
Rent due but not received Rs.5,000
36. Fixed Capital Method Fluctuating Capital Method
Two accounts are prepared:
Capital Account and Current
Only a single account is
prepared: Capital Account
The capital balance remains
Capital balance fluctuates
Both Capital and Current
Accounts appears in the
Only Capital Account appears in
the Balance Sheet.
If this method is used then it
must be specified in the
If this method is used then it is
not necessary to specify the
method under the Partnership
Fixed Capital Account will
always show a Credit Balance
Fluctuating Capital account
may show debit balance as well.
37. A, B and C were in partnership and towards the end of 2019 most of their records were destroyed by fire.
The Balance Sheet as on 31st Dec, 2018 was as follows:
The partners' drawings during 2019 have been provided at A Rs.1400, B Rs.1000 and C Rs.650. On 31st Dec
2019, the cash was Rs.3200, Debtors Rs.4025, Stock Rs.5900, Advance payments Rs.25 and creditors
Rs. 6040.Machinery is to be depreciated by 10% per annum and fixtures and fittings 7 ½%, 5% interest is
to be allowed on capital. The partners share profits in the proportion of ½, 1/3 and 1/6. You are required to
prepare a statement showing the net trading profit for the year 2019 and the division of the same between
partners, together with the balance sheet as on 31st Dec. 2019.