Disadvantages / Limitations of Single Entry System

You must have heard about the single entry system and double entry system. In a single entry system, all the records are maintained separately. In this article, we have discussed the advantages and disadvantages / Limitations of single entry system.

Simply we can say that for each and every expense, separate records are maintained. In a double entry system, the only important records are maintained.

For example, the records of transactions and important expenses are recorded in a double entry system. A single entry system is mostly used by small businesses as it helps them to keep track of all the expenses.

Earlier, it was tough to keep the records using a single entry system as it requires many calculations but nowadays there is much software available in the market. This software has made life easy for small business owners. They can do all those large calculations easily.

Similarly, many softwares are also available which help in maintaining the record in a double entry system. A double entry system isn’t hard to maintain but technology has made it easier. Big business companies don’t need to keep records of all expenses.

Therefore, they prefer the double entry system of bookkeeping. The small business holders prefer a single entry system as they want to keep a record of each and everything.

How the Single Entry System is beneficial 

We already discussed how a single and system is beneficial for small business holders. Here we will learn about it more clearly.  Sone of the advantages of using a single entry system is listed below.

•    Single entry system doesn’t need any trained or skilled person for management. Anyone who knows basic calculations can use it. The calculations used are very simple. Although there might be some errors as the calculations are done by a human.

•    Another benefit of using a simple entry system is that it doesn’t require any equal debit or credit. This simply means that you need to balance the sheet using equal debit and credit amounts. The basic calculations are enough to balance the sheet. In case when you can’t find the balance on the sheet, it’s common that there might be some calculation error. As we know that the calculations are made by humans, so it’s very common to have humans make errors in it. Therefore after checking the error and correcting it, you will find the sheet is balanced by itself.

•    All the transactions that are done in a simple system are recorded in one notebook or journal. There might be too many small journals attached in one notebook. You will not find different notebooks or different journals for the transactions that take place in a single entry system. All the calculations for each and every expense whether large or small are recorded in a single notebook or journal. Therefore, it is easy to check all the transactions done. In a double entry system, the records are maintained in different journals so it’s a bit tough to keep track of all transactions. 

We all know that everything has both positive and negative sides. Therefore, single entry systems also have some negatives. Some disadvantages of single entry system are listed below:

•    Since all the calculations are done by humans, therefore there might some mistakes in the calculations. The mistakes can be corrected by reevaluating the calculations. It can be a little time-consuming. It is also possible that a person isn’t able to find the mistake easily. Simply we can say that the single entry system requires a person to focus on the calculations to avoid any kind of mistake.

•    Since all the records are maintained in one notebook, there are chances of some thefts in this. All we focus on is the balance of credit and debit after calculations, so it’s easier for a person to do some changes in data so that the final result is a balance between debit and credit. A person will not find the problem until he or she doesn’t check the whole calculation. Therefore, if you use a single entry system for the bookkeeping of records, you need to be careful about the calculations and data. With some precautions, thefts can be avoided in the single entry system.

Double Entry System : Advantages and Disadvantages

What is Cash Flow and it’s Types ? Cash Flow Statement and Analysis

What is Limitations of Single Entry System ?

Till now, we have discussed so many things related to the single entry system. We learned about the advantages and disadvantages of a single entry system. But, there are some limitations when it comes to the bookkeeping of records using a single entry system. Some of the limitations will be discussed further.

•    In the single entry system, you will not be able to differentiate between personal snd business transactions. This is due to the fact that in a single entry system, all records are maintained in only one notebook. Both the business transactions and the personal transactions are maintained in the same notebook or journal. So, it is very difficult to know about the transactions done for personal purposes or business purposes. 

•    The calculations done in a single entry system cannot be trusted. This is due to the fact that the calculations are done by a human. Therefore, there are possible chances of errors in the calculations. Therefore, without proper checking, you cannot say that the calculations are accurate. You need to check the calculations precisely. Although today we have many softwares that can help us to do the calculations and there are fewer chances of errors in it. Technology can help us to overcome this limitation easily.

•    In the single entry system, you cannot know the actual financial condition. This is due to the fact that the transactions made aren’t clear. Also, there might be calculation errors so just by seeing the results we cannot decide about the financial condition of a business. All this happens as the transactions whether personal or business are maintained in a single notebook or journal. Therefore, to know the financial condition of a business, you should be aware of the transactions. This will help in knowing the actual situation of a business.  In this way, we can overcome this limitation and use the single entry system for bookkeeping.