— Kishore V, SME and ACW at Edumarz.
Systems of accounting:
There are two basic systems of accounting they are:
single-entry system and
double-entry system.
Single entry system:
The single-entry system is not a comprehensive financial transaction recording system.
It does not keep track of the two-fold impact of each transaction.
Only personal accounts and a cash book are maintained under this approach, rather than all of the accounts.
In truth, this isn’t so much a system as it is a lack of one, as there is no consistency in the way transactions are recorded.
Only one part of some transactions are documented, whereas both sides are recorded in others.
The accounts kept under this method are incomplete and unsystematic, making them untrustworthy.
Double-entry system:
A double-entry bookkeeping system is a systematic and comprehensive method of tracking an organization’s financial transactions.
Every transaction, according to this theory, has a two-fold consequence.
That is, there are two parts involved:
receiving and
giving,
which are signified by the terms debit and credit.
The primary idea of the double-entry system is that there must be a corresponding and equivalent credit for every debit.