SINGLE ENTRY BOOKKEEPING SYSTEM OR INCOMPLETE RECORDS

Double Entry Bookkeeping System

1. There are three fundamental accounting values which are in accounted for in bookkeeping – assets, liabilities and owner’s equity.

2. Business transactions are activities or events which cause certain changes in the three accounting values.

3. All business transactions and events have a two –fold effect on accounting values.

Single Entry Bookkeeping System

1. Some business entities find it expensive to retain a regular bookkeeper.2. Records or books of accounts are kept by a person not trained in accounting.3. The two-fold effects of the transaction are not taken up in the records all the time.4. Only the value received or will be received or the value given up or will be given

up is recorded.5. The records maintained are represented only by “bare essentials” like cash,

accounts receivable, accounts payable, property, plant and equipment and taxes paid.

6. The major record is the cashbook showing all receipts and disbursements.7. With respect to accounts receivable and accounts payable, only a list of

customers and creditors is made with their corresponding balances.

Incomplete Records

1. Books of accounts of the business entity are kept by a trained accountant but as a result of a calamity some of the records or books are destroyed.

Characteristics of a Single Entry System

1. A limited number of books and accounts are maintained. Records are kept for cash, receivables, payables and proprietorship transactions only.

2. Not all transactions are taken up in the books. Only those transactions that affect cash and personal accounts are taken up in the books.

3. A trial balance can not be prepared because of incomplete records.4. The preparation of financial statements requires considerable reconstruction and

analytical work.

Single Entry Books

1. Cash book2. Daybook or Memorandum book – a diary where all the non-cash transactions

and events are noted down.3. Ledgers – cash, receivables, payables and owner’s equity accounts

1

Preparation of a Statement of Assets and Liabilities

1. Draw up a list of all assets and have their values determined based on the available documents or by appraisal.

a. Cash in bank may be determined from a bank statement.b. Cash on hand may be determined by counting.c. Receivables may be determined from the ledgers or uncollected sales

invoices.d. Merchandise or supplies may be determined by conducting a physical

count.e. Property assets may be determined by inspection and appraisal.

2. Draw up a list of all liabilities and determine their amounts.a. Trade payables may be determined from unpaid suppliers invoices, bills,

statements of accounts and promissory notes issued.b. Checks issued after the statement cut-off date may give information about

obligations existing as of statement date.

3. Determine owner’s equity.a. Owner’s equity is determined by subtracting total liabilities from total

assets.

Determining the Results of Operations

1. Net assets approach (capital maintenance concept) or single entry method or net worth method or indirect method is used.

2. Compare beginning and ending capital balances after taking into consideration all additional investments and withdrawals.

Preparation of an Income Statement

1. Rewrite all the completed transactions as evidenced by the business documents.2. Reconstruct the revenues and expenses under the accrual basis based on an

analysis of cash receipts and disbursements.

May 2009

2

REVIEW QUESTIONSSingle Entry Bookkeeping System or Incomplete Records

1. What is the double entry bookkeeping system?

2. What is the single entry bookkeeping system?

3. What are the characteristics of a single entry system?

4. What are the usual books maintained under the single entry system? Briefly describe each.

5. What documents may be used in determining the cash balance?

6. What documents may be used in determining the receivables balance?

7. What documents may be used in determining the payables balance?

8. How is owner’s equity determined under the single entry system?

9. How is net income computed under the single entry system?

10.How is the income statement prepared under the single entry system?

May 2009

3