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SS2: FINANCIAL ACCOUNTING - 2ND TERM

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Meaning of Single Entry

This is a system of accounting which ignores the two-fold aspect of each transaction. It takes into account only the personal aspect of each transaction. The alternative term incomplete records are often applied to books of account kept on a single entry system. 

The records prepared by the record keeper are incomplete or inadequate, hence accountants have to use their mental Ingenuity to prepare the accounts from the available Information. Incomplete records present a large amount of unsorted Information.

Characteristics of Single Entry

(i) Only personal accounts of debtors and creditors are kept.

(ii) Profit or loss could only be ascertained by comparing capital at the beginning and capital at the end.

(iii) Real and nominal accounts are not kept.

Advantages of Single Entry

1. Single entry system is very easy and simple to operate

2. Profit is easily computed under this system

3. It is very useful for small business enterprise

4. It is economical as it does not require a large volume of books for recording transactions

Disadvantages of Single Entry

1. It is not acceptable for tax purposes because of incomplete records of transactions.

2. Fraud may be easily committed.

3. It does not show the true profit or loss of the organization.

4. Records of Information are not complete.

5. Double entry principle is ignored.

6. It is not possible to ascertain the arithmetical accuracy of the book.

7. Flexibility of the principle of double entry is not present.

There are two approach of presenting the results of business with incomplete records. These are:

(i) Comparison of opening net assets with closing net assets to ascertain profit or loss for the period taking into account additions to or withdrawals from Capital during the period.

(ii) Preparation of full final accounts from incomplete records.

Ascertainment of Profit from Incomplete Records.

Profit or loss are ascertained, under the single entry system, by a comparison of the values of the net assets (Capital) at two specified dates after taking into account addition to or withdrawals from, Capital during the period. The difference between these two values represents the profit or loss, according to whether there is an increase or decrease in the figures.

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