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Seen 3..., , Accounts From Incomplete Records, (Single Entry System), , synopsis aes, , 3.1 Meaning, , 3.2 Features, , 3.3 Conversion of Single Entry into Double Entry System, + Illustrations, * Questions for Self-Study, , , , , , [SINGLE ENTRY SYSTEM, , In India, there are many small-scale businesses which do not keep complete records for all, their financial transactions because the proprietors of these business are untrained in accounting, and hence consider it better to keep an additional productive employee rather than a book- ~, keeper. They assume that without an elaborate accounting system, they can exercise control over, assets, expenses, revenues and liabilities. They record a few transactions completely just like the, double entry system but a majority of the transactions are recorded only partially. Therefore, it is, also known as "Accounts from Incomplete Records". Incomplete Accounting Records are those, accounting records which, at present, are not complete according to double entry principles., Many authors describe it as the ‘Single Entry System’ but according to a majority of accountants,, it is appropriate to describe it as ‘Incomplete Records’ because incomplete records contain :, i) both the aspects of some of the transactions; ii) only one aspect of some of the transactions;, iii) no aspect of some of the exceptional transactions., , Reasons for Incomplete Records :, , Accounting records may be incomplete due to anyone or more of the following reasons :, , i) the businessman may be untrained in accounting;, , ii) the businessman may be ignorant of the separate legal entity assumption;, , iii) the businessman may be ignorant of the double entry accounting principles;, , iy) the businessman may not intentionally maintain proper accounts to evade taxation;, , ¥) _ destruction of the books of accounts due to fire, flood, etc. and, , vi) the businessman may assume that without double entry system he can exercise control, , over assets, liabilities, expenses and incomes., , The number of small-scale businesses which do not keep complete records for their business, transactions is significant in India. Therefore, it is necessary to learn ‘Single Entry System’ by the, students of accounting and management, , Many small businesses have neither the, et of accounting records using the double en, , , , time nor the experience necessary to maintain a full, try system; and cannot afford the expense of outside, , (3.4)

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Fe eecied, Account. Again, certain transactions are reco!, in ly, certain transactions are not recorded a, , , , , , h accounting records are not, , , , “ i hic!, Single Entry System may be defined as, “a Lia Spi a, strictly according to the double entry pencils ot . pate “Jouble entry principle, it spy, i i corde ah, Petes prepere stil balance eek the arithmetical agile je a, Strictly speaking, Single Entry constitutes incomplete reco Sea eeee ie recordin a, accounting. Therefore, the expression Single Entry does not mean only, , one entry for each transaction., Classification of Single Entry System, The Classification of Single Entry System is shown below in Fi, , , , , , , , , , gure 3.1., , , , , , Fig. 3.1 : Classification of Single, ; The expression ‘Single Entry' covers a wide oe aoe : the, brief notes of transactions kept by a hawker to the elaborate eet ae a, enterprise. The degree of incompleteness of records differs fro: Is kept by a large tradi, according to its nature and complexity. Generally, the Single E mM one business to _anothe, the following three categories : gle Entry System can be classified i”, 1) Pure Single Entry System:, , , , , , 2) Quasi Single Entry System :, Under this system, Personal Accounts,

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In the absence of record of the two-fold, , a Trial Balance and check the arithmetical accuracy of the books of accounts., , vy), , vi), , vi), , , , aspect of every transaction, it is not possible to, Similarly, no Balance Sheet can be Prepared in the, , This system is highly changeable and flexible and, of operation., , absence of balances in the ledger., is not governed by any definite rules, , iy) Under this system, the profit or loss can be found out but its comparison will not be, , available., This system is a mixture of, Double Entry, Single Entry, and No Entry., , This system is suitable for small businesses where the proprietor or partners can directly, control the affairs of the business., , Single Entry System can be classified into, Pure, Quasi and Simple Single Entry System., , , , , , Limitations of Single Entry System, , , , , , Single Entry System ignores the concept of duality and, therefore, transactions are not, recorded in their two-fold aspects. As a result, the final accounts of the business concern cannot, be prepared in the usual way. The other limitations are as under :, , i), , ii), , iti), iv), i), , vi), vii), , Arithmetical accuracy of the accounts cannot be checked because no agreed Trial, balance can be prepared., , True Profits or Losses cannot be ascertained because Trading and Profit and Loss, Account cannot be prepared., , True financial position cannot be ascertained because Balance Sheet cannot be prepared., It is difficult to conduct the audit of such records., , It is difficult to operate internal control system., , It is difficult to operate internal check system., , It is difficult to exercise control over assets., , Vili) It is difficult to detect fraud., , ix), x), , xi), xii), , Such records are not recognised by the Courts, Sales Tax and Income-Tax authorities., This system engenders a spirit of laxity and invites frauds and misappropriations., , No limited company can keep account under this system, because of legal restrictions., Owing to incompleteness of records, propet appraisal of the financial Position of the, business is not possible.

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transactions are not recorded,, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , lt : ware f all transactions Both the aspects of all transagi, WD [Both aspects of all Both the aspects of @ are not recorded., transactions are recorded. Sook, General | In this system, only Debtors’ Legg, iiy_| Preparation of Cash Book and | In this system, Cash Ledger and | and credifors Ledger are, General ledger, etc. , Debtors ie Cash Book is also kept but perso, Creditors’ Ledger are main 5 transactions get mixed yg, business transactions., {| Usually, Cash Account ang, iv) | Nai f Accounts | All of accounts — Personal, ri, Sewn = itd are maintained. _| Personal Accounts are maintained,, oo ithmetical accuracy of the recon, V) | Trial Balance Arithmetical accuracy of the records Arithme f, can be checked by preparing a Trial | cannot be checked since Thal, Balance. Balance cannot be prepared,, vi) | Determination of True Profit} True Profits or Losses can be | Only estimated profits oF losses can, or Loss determined by preparing Trading, | be determined since Trading and, and Profit and Loss Account. Profit and Loss Account cannot be}, prepared., vii) | Financial Position True financial position can be known | Only estimated financial position, by preparing a Balance Sheet. can be known on the basis 0, Statement of Affairs., vill) | Adjustments All types of adjustments are made | No Special attention is given 10, = wie preparng Final Accounts, adjustments. |, ix) oe of Financial - ee of financial data, | Vital ratios cannot be computed, Ms easton pes of (such as Gross Proft Rat, Mil, poke i are maintained | Profit Ratio, etc.) if the accounts, - Maintai i, x) _| Utility Itis used by all types of traders, It oe a = a |, | Xi) | Recognition by Government | Records maintained according to thi ~ ae, system are recognised by pe eos. maintained according ¥, Government, Y the | this system are not ised |, the Government., , , , [Ascertainment of Profit or Loss of Sole Trader

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| Statement of Affairs Method Conversion of Single Enty, 7 into Double Entry System, ~ Fig. 3.2: Methods for Ascertainment of Pro :, 4 fit or Loss ade!, a pa or of Sole Trader, , BR ices are Method, which is also termed as Capital Comparison Method,, Beep and’ th are prepared. One, at the beginning of the period for finding out the, Capi ‘e eS . hee at the end of the period for finding out the Closing Capital., Ree, £ = een the Opening and Closing Capital. If the Closing Capital is more, ¢ Opening Capital, it shows an increase in capital, which means a profit. Conversely, if the, Capital is less than the Opening Capital, it shows a decrease in capital, which means a, Joss for the period. In other words :, Pa Ralasice Sheet: Opening Balance Sheet : Assets = Liabilities + Capital, losing Change in period : A Assets = A Liabilities + A Capital, , The change (A) in assets may be due to change in liabilities or capital or both. The increase in, due to increase in capital represents profit., CONVERSION OF SINGLE ENTRY INTO DOUBLE ENTRY SYSTEM, , " Under the Single Entry System, adequate accounting information is not available and the, profit disclosed by that system is not gladly accepted by the revenue authority. For better, management of the business, avoiding harassment by the revenue authorities, and facing, challenges of the competitors effectively, sometimes a trader may adopt the Double Entry System, ing up the Single Entry System., 's of Conversion of Single Entry into Double Ent, In the Single Entry Systems, there are varying degrees of incompleteness, and the procedure, tobe adopted for conversion must depend upon the nature of the records and data available. It is, “not possible to give a formula which can be applied in every situation. However, as a general, “nile, the following steps are followed in the simple process of conversion of Single Entry into, , louble Entry System :, , p Step1: Prepare Cash and Bank summary ie. Cash Book to ascertain the missing, , information (such as Opening and Closing Balance, Cash Sales or Cash, Purchases, Drawings made during the period, ete.)., , Step2: Prepare Total Debtors Account to ascertain the missing information (such as, , , or Closing Balance, Credit Sales, Collection from Debtors, Bills, , the period, etc.)., , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Receivable drawn during