Maharashtra Board Class 11 Book Keeping and Accountancy Chapter 10 Single Entry System PDF Download

Single Entry System

10.1 Introduction And Meaning Of Single Entry System

We have studied Double Entry System of Sole Trading concern in previous chapters. Now in this chapter we are going to learn Single Entry System of Sole Trading concern only. In ancient times there was no scientific method of recording business transactions. They were maintaining record of business transactions by their traditional methods. Single Entry System can be useful suitable for small size business, where the number of transactions are small. Single entry system is not a particular system of accounting rather it is a Double entry system in an incomplete and unscientific form. It is not a scientific and accurate system of Accounting.

Meaning Of Single Entry System

Under this system, Cash Book and personal accounts of debtors and creditors are maintained. Real and Nominal accounts are not maintained. Single Entry System has no proper set of rules to be followed.

Definitions

i) 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."

ii) Carter has defined Single Entry as, "a method or variety of methods, employed for the recording of transactions, which ignores the two fold aspect and consequently fails to provide the businessman with the information necessary for him to be able to ascertain his financial position."

Single entry system is a combination of Single entry, Double entry and No Entry.

Single Entry System Is Suitable For The Following Reasons

1. It is a very simple method of recording business transactions.

2. Accounting records can easily be maintained since it does not require adequate skill and knowledge of principles of Book Keeping.

3. It is less expensive as compared to Double Entry Book Keeping.

4. Ascertainment of Profit or Loss is much easier.

5. It is to small concern with limited number of transactions and very few assets and liabilities.

6. It can be prepared easily in short period of time.

Difference Between Single Entry System And Double Entry System

Teacher's Note

Single Entry System is like a simple notebook that a small shopkeeper keeps. For example, a chai shop owner in Delhi just writes cash in and cash out, but does not keep detailed records like big companies do.

Exam Trick

Remember: Single Entry = incomplete records. Just like your school notebook is incomplete compared to your complete textbook. Only some accounts are kept, not all.

Points To Remember

Single Entry System keeps only Cash and Personal accounts.
Real and Nominal accounts are not maintained in this system.
Trial Balance cannot be prepared under Single Entry System.
Statement of Affairs is prepared instead of Balance Sheet.
It is suitable only for small businesses with few transactions.

10.3 Preparation Of Opening And Closing Statement Of Affairs

To find out the financial position of the business, under Single Entry System, following Statements are prepared.

i) Opening Statement of Affairs

ii) Closing Statement of Affairs

iii) Statement of Profit or Loss.

Statements Of Affairs

A Statement of Affairs is a statement of Assets and Liabilities. It is as good as Balance Sheet. Right hand side is used for recording Assets and left hand is used recording for Liabilities. Statement of Affairs is prepared under the Single Entry System in order to find out the amount of Opening or Closing Capital of the business. The difference between the total of Assets and total of Liabilities is considered as the amount of capital.

Opening Statement Of Affairs

Opening Statement of Affairs is prepared to findout opening Capital balance. Opening Assets and Opening Liabilities are shown in the "Opening Statement of Affairs". If the total of the Assets side is greater than the total of the Liability side it represents Opening Capital.

Opening Capital = Opening Assets – Opening Liabilities

Closing Statement Of Affairs

Closing Statement of Affairs is prepared at the end of the Accounting year to find out the closing Capital balance. Closing Assets and Closing Liabilities are shown in the "Closing Statement of Affairs". If the total of the Assets side is greater than the total of the Liability side it represents Closing Capital.

Closing Capital = Closing Assets – Closing Liabilities

Teacher's Note

Think of Statement of Affairs like taking a photo of your business on a specific date. It shows everything your business owns and owes, just like a Balance Sheet. A shop owner in Mumbai takes this photo on opening day and closing day.

Exam Trick

Remember: Assets on right, Liabilities on left. When Assets are more than Liabilities, the difference is Capital. Think: Assets minus Liabilities equals Capital always.

Points To Remember

Statement of Affairs shows Assets and Liabilities on a specific date.
Opening Capital is found by: Assets minus Liabilities at the start of the year.
Closing Capital is found by: Assets minus Liabilities at the end of the year.
This statement is just like a Balance Sheet in Double Entry System.
Capital is the balancing figure in Statement of Affairs.

This is a preview of the first 3 pages. To get the complete book, click below.