Single Entry and Double Entry Accounting

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Single entry accounting/Cash accounting. This system records only cash movement of transactions and that too up to the extent of recording one aspect of the transactions. This means that only receipt or payment of cash is recorded and no separate record is maintained (about the source of receipt and payment) as to from whom the cash was received or to whom it was paid. Double entry book keeping/Commercial accounting. Double entry or commercial accounting system records both aspects of transaction i.e. receipt or payment and source of receipt or payment. It also records credit transactions i.e. recording of Electricity Bill or accruals of Salary payment etc. This concept will be explained in detail in the next lectures but for the time being it should be noted that in cash accounting date of receipt / payment of actual cash is important while in commercial accounting the date on which the expense is caused (whether paid or not) as well as the spreading of the cost of c
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RECORD KEEPING AND SOME BASIC CONCEPTS

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We can maintain a diary of transactions and note the daily transactions like sale, purchase etc. in it.

Problems Faced in Maintaining Diary of Transactions

• How will we come to know the income and expenses from various sources?• We only have a sheet / page on which daily transactions are listed.• We do not know which product is selling better and which is not.

Available AlternateOne can go through all the transactions at the end of the month and note different types of transactions on different pages. So that every page gives complete detail for a different type of transaction like sales of different products and expenses of different types now try to go through these transactions and separate transactions of different types. 

But what if the number of transactions is large?

Is it really possible to go through hundreds or thousands of transactions at the month end and analyse

them to obtain required results. Sales and purchase are not always for cash. Some times the payment / receipt is delayed to a future date (Sale/purchase for “UDHAR”). The diary that we have discussed above, records cash transactions only. The “UDHAR” (credit) transactions may be noted in separate diary. Now we have two diaries one for cash and one for credit. We need to know total sales and purchases (both cash and credit) and other information like the amount that is payable and receivable.


How will we get our required results now?
Do we need another diary to combine information from both these diaries?

But when we receive or pay cash for the credit transactions will we again record the transactions on the day,

When cash is received or paid? If so, where to record?

So the problems keep on increasing with the size or volume of business. But one thing is becoming

certain and that is that an accurate reflection of business transacted can only be obtained if both cash and credit transactions are recorded in such a manner that there is no duplication and yet the transactions are completely recorded. This is possible only under Commercial Accounting.

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