A single-entry system (also known as a cash basis accounting) involves recording transactions when the money is paid instead of when they occur. In an accounting system, a single entry system can’t keep track of accounts receivables, payables, and inventory.
A single-entry system is the simplest form of bookkeeping. It does not follow any rules or conventions. Small business entities use them with no statutory requirements for preparing financial statements.
This bookkeeping system is very simple, as every accounting transaction involves only one entry to record it. As a result, this is an easy-to-use, easy-to-maintain system that small businesses and individuals use efficiently who want to keep their records up to date with minimum effort.
Let’s illustrate the single-entry system with the help of a simple example.
John’s Books and Stationery Store is a single trader who runs a small stationery store in New York. He recorded the transactions for the last week, beginning from 1st June 2022 to 10th June 2022, in his journal as follows:-
Pure single entry is a method of accounting in which businesses only records personal accounts i.e. real and nominal accounts are ignored. However, businesses don’t use this practice, as it does not ensure that transactions are correctly matched.
Small businesses and non-profit organizations that rely on a single set of books to record all financial transactions use this accounting system. In addition, any member within the organization can access the information who may also need access to specialized accounts (e.g., payroll) or other data points from other sources (e.g., bank statements).
Quasi-single entry is a type of simple, pure, and complex single entry system. The main difference between quasi-single entry and other simple systems is that you can’t create new items in the account without creating an invoice for them.
It offers many benefits over its counterparts by allowing companies to track all transactions from one central location. However, the downside to using this method is that it requires more time than other systems because you must manually create individual invoices for each item you sell or buy.
A personal business entity, such as a sole trader or partnership, maintains the single entry system. Businesses such as companies and non-profit organizations can also use this system. Moreover, government agencies that operate on a small scale and do not need complex accounting system also use single entry system of accounting.
A single-entry system is a simple form of bookkeeping used by small businesses. This method of accounting requires only one entry for every transaction and does not provide detailed financial reports. The single-entry system is suitable for sole small traders, freelancers, and partnerships with few transactions to record.