course bg
EduPristine>Blog>Bookkeeping Basics: Bookkeeping Entry systems

Bookkeeping Basics: Bookkeeping Entry systems

December 17, 2014

In the earlier post we discussed the basic process of Bookkeeping. While there is no set system that should be followed for bookkeeping (it’s just recording financial transactions and that can be made any which way) but businesses and other organizations use two common bookkeeping systems: Single-entry bookkeeping system and Double-entry bookkeeping system.

Single-entry bookkeeping is adequate for many small businesses and it uses only income and expense accounts, recorded primarily in a revenue and expense journal. Double-entry bookkeeping requires posting (recording) each transaction twice, using debits and credits.

Bookkeeping entry systems: Single-entry bookkeeping

A single entry recording system does not include debit and credit columns but instead simple entries for things like cash, tax paid, accounts payable and accounts receivable. Income and balance sheets can be created using the information in the single-entry books. Cash book is the primary bookkeeping record in single-entry bookkeeping, this is similar to a checking (cheque) account register but allocates the income and expenses to various income and expense accounts. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory and travel expenses.
The type of records kept may vary considerably, but generally include:

  • Cash receipts
  • Cash payments – expenses associated with the business
  • Debtor accounts – a record of the amounts owed, and by whom
  • Assets and liabilities – records of these are often poorly kept in this system
  • Bookkeeping entry systems: Double-entry bookkeeping

    Double-entry bookkeeping is a type of Bookkeeping entry system, recording all the payments out, and payments in, of a business based on the notion that for each creditor there must be a debtor e.g. if someone sells something, someone else must buy it, or if someone is paid for a service, someone else must pay them for that service. For each transaction at least two entries are made into the ledger – one being a credit and one being a debit, hence the term ‘double entry’.

    Keeping accurate entries for debits and credits makes accurate accounting much easier to prove by totalling the credit and debit columns which should be equal. If an error was made during the entry of data into either column it will be easy to find. Double entry bookkeeping also makes record keeping more orderly and is very useful when creating profit and loss statements, or equity, assets and liabilities statements.

    Double-entry allows for accrual basis accounting, which is the generally accepted accounting method that all public companies must use for reporting.

    Bookkeeping entry systems should be chosen based on the needs of the corporation and in accordance with the public guidelines

    About Author

    avatar EduPristine

    EduPristine is a member of Adtalem Global Education (NYSE: ATGE), a global education provider headquartered in the United States. Adtalem is a 3 billion dollars (20,000 crores) company that has about 9 institutions and companies with more than 16,000 employees spread across 145 locations. Adtalem takes pride in training 142,000 degree-seeking students all over the world.The organization's purpose is to empower students to achieve their goals, find success and make inspiring contributions to our global community. EduPristine is one of India's leading training providers in Analytics, Accounting, Finance, Healthcare, and Marketing. Founded in 2008, EduPristine has a strong online platform and network of classrooms across India and caters to self-paced learning and online learning, in addition to classroom learning

    Comments

    Interested in this topic?

    Our counsellors will get in touch with you with more information about this topic.

    * Mandatory Field

    Post ID = 68937