Single Entry Vs Double Entry Bookkeeping
The basis of a good accounting practice is all about keeping altleast the basics right, which is bookkeeping. Most of them who are new to accounting don’t have much clarity on the types of bookkeeping and the difference between bookkeeping and accounting still lingers around in their minds. Bookkeeping is nothing but recording all the financial transaction in a book which is a vital part of accounting.
But accounting has lot more to offer based on proper bookkeeping like analyzing reports, and studying the various parameters of financial status of an organization. So to fine tune the accounting of an organization one need to know the types of bookkeeping and their pros and cons. Major types of bookkeeping are single entry bookkeeping and double entry bookkeeping.
Single entry bookkeeping is a simple system where the revenues and expenses are recorded in a single column only a consolidation is done. The main disadvantage of single entry bookkeeping is that individual values cannot be got, so only the profit loss can be calculated. Single entry bookkeeping cannot be related to a balance sheet so finding the actual financial position cannot be got from this bookkeeping, to find errors it take lot of effort.
Usually compared to single entry book keeping system double entry book keeping system is used in large organizations where more cash is dealt with. The thumb rule for double entry bookkeeping is that at least two accounts gets affected where one account is debited and the other is credited for each transaction taking place. Say when an organization receives revenue under an account named “X” the amount is credited in the account “X”. If paid in cash it is “debited” from the “Cash Account” or the amount is yet to payed it is debited from “Accounts Receivable”.
To customize an “Accounting Information System” using double entry bookkeeping need a marginally a high investment. Numia.biz is an easy to use customizable online bookkeeping system suitable for all businesses with advanced reports and budgeting options.