An analysis of single entry system

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com/aaimagestore/essays/1414791.003.png”/>Measure 1– Computation of hard currency gross revenuesThe assorted hard currency minutess i.e. hard currency escape and influxs are recorded in the hard currency history. The equilibrating figure in the history will be hard currency gross revenues, opening balance, drawings or shuting balance depending on the missing figure.Cash Book ( Cash )Dr.

Cr.

OMR OMR
To equilibrate b/f 1,000 By bank 10,000
To gross revenues ( equilibrating figure ) 24,000 By wages 4,000
By creditors 2,000
By drawings 8,000
By balance c/d 1,000
25,000 25,000

Hence, hard currency gross revenues areOMR 24,000.Measure 2– Calculation of Opening Bank BalanceThe influxs and escapes from the bank are recorded in the Bank history.

The reconciliation figure will be the bank balance in the beginning or stop or loan depending upon the missing figure.Cash Book ( Bank )Dr. Cr.

OMR OMR
To hard currency 10,000 By balance b/f ( bal. figure ) 5,000
To debitors 75,000 By creditors 70,000
To Bank Loan 10,000 By concern disbursals 12,000
By balance c/d 8,000
95,000 95,000

Hence the opening bank balance isOMR 5,000.Since it is on the recognition side, it can be understood that it is an overdraft.Measure 3– Preparation of Total Creditors historiesThe creditors account can be prepared by entering the money paid to the creditors and gap and shutting balance.

In this instance it can be used to happen the recognition purchases which is the equilibrating figure.Entire Creditors AccountDr. Cr.

OMR OMR
To bank 70,000 By balance b/f 4,000
To hard currency 2,000 By Cr. purchases ( bal.

figure )

77,000
To equilibrate c/f 9,000
81,000 81,000

Hence recognition purchases areOMR 77,000.Measure 4– Preparation of Entire Debtors historiesThe debitors account can be prepared by entering the money owed by the debitors and gap and shutting balance. In this instance it can be used to happen the recognition gross revenues which is the equilibrating figure.Entire Debtors AccountDr.

Cr.

OMR OMR
To equilibrate b/f 10,000 By bank 75,000
To recognition gross revenues ( bal. figure ) 100,000 By balance c/f 35,000
110,000 110,000

Hence recognition gross revenues areOMR 100,000.Measure 5Preparation of Statement of Affairs to calculate opening capitalThe statement of personal businesss can be prepared once the losing figures have been computed with the liabilities in one column and assets in another column. It can be used to calculate the opening capital of the entity.NasserStatement of Affairs as on 1stJanuary 2014

Liabilitiess OMR Assetss 31.12.

2014

Assorted Creditors 4,000 Cash in Hand 1,000
Bank Overdraft ( step 2 ) 5,000 Assorted Debtors 10,000
Capital ( equilibrating figure ) 30,000 Stock of goods 28,000
39,000 39,000

Measure 6– Preparation of Final historyNasser Profit and Loss history for the twelvemonth stoping 31stDecember, 2014

OMR OMR
To Opening stock 28,000 By gross revenuesCash gross revenues ( Step 1 ) 25,000Recognition gross revenues ( Step 4 ) 100,000 125,000
To buy ( step 3 ) 77,000 Closing Stock of goods 11,250
To Gross net income33 1/3 % on cost = ? on gross revenues= ? of 125,000 31,250
136,250 136,250
To Wages 4,000 By Gross net income b/f 31,250
To Business Expenses 12,000
To involvement on Bank Loan 1,000
To net net income 14,250
31,250 31,250

Hence, Nasser’s Gross net income for the ear stoping 31stDecember, 2014 is 31,250 and his net net income is 14,250

2.5. Advantages and disadvantages of the Single Entry System

AdvantagesOne of the chief advantages with utilizing the individual entry system is the comparative easiness with which the histories can be prepared. A exclusive owner or spouse without progress accounting accomplishments can go on to keep path of their histories utilizing this method. This besides aids in doing this system less expensive as the entity need non engage professional accounting staff to pull off the histories of the company and it besides makes the calculation of net income and loss comparatively simple and consecutive forward.

Hence, the individual entry system would be a suited system for keeping the histories of little houses.DisadvantagesOne of the chief drawbacks of the system is that it is non accurate, systematic or scientific. The individual entry system does non hold a fixed set of regulations that need to be followed while fixing the histories as compared to the dual entry system. Hence, the chance of deficiency of uniformity, fraud, embezzlement of assets and inaccuracy are really high. In add-on, due to the deficiency of the accounting via the double system, this system of accounting is regarded as uncomplete and makes it hard to determine good will and the fiscal place of the company. The individual entry system merely maintains personal histories and does non maintain a record of existent and personal histories, thereby impacting the contemplation of the net income and loss every bit good as the fiscal place of the company.

In add-on, due to the rawness of the system, it can non be used for revenue enhancement purposed. This will besides do it hard for the direction to be after schemes and pull off the concern and lead to substandard disposal as the public presentation of the company can non be compared over the old ages. Furthermore, under this system, if there is a larceny or loss, it will comparatively harder to observe. Hence, the individual entry system is more appropriate for little houses and non suited for larger corporations that need to keep more accurate and clear histories.

2.

6. Suggestions to forestall loss of informations

One manner in which an entity can protect against the loss of informations is by utilizing accounting information systems ( AIS ) . As stated by Amy Fontinelle ( 2014 ) The AIS “is a construction that a concern uses to roll up, shop, manage, procedure, retrieve and describe its fiscal informations so that it can be used by comptrollers, advisers, concern analysts, directors, main fiscal officers ( CFOs ) , hearers and regulative and revenue enhancement agencies” . The AIS therefore maintains security of informations. These systems besides need on-line protection in the signifier of anti-virus, firewalls etc. This information besides needs to be backed up on a timely and fixed footing so that it can be retrieved if lost.Additionally, a house should hold internal controls to forestall embezzlement, fraud from larceny etc.

These internal controls will see that the fiscal statements are prepared clearly and it is complete. They besides province the accounting regulations to be followed by the company including when the backups should be done, who should hold entree to the QuickBooks. The dual entry system besides helps to protect the house against fraud and embezzlement as the accounting informations can be compared against the balances and journal entries thereby doing it hard to pull strings it.The director of the company can besides hold an outside comptroller like a CPA reappraisal the statements and suggest better patterns and larn how to keep the histories to minimise fraud and embezzlement.

3.

Decision

Therefore, it can be seen that the Singly Entry system of accounting is more suited for smaller organisations that do non hold the accomplishments and experience to utilize the dual entry system. Although it is more convenient, less expensive and simple, the disadvantages of the Single Entry system far outweigh its advantages. This has been explained in item in the assignment along with the stairss required to cipher the net income and loss.Using this, a measure by measure computation of Nasser’s Opening Capital ( OMR 30,000 ) , Gross Profit ( OMR 31,250 ) and Net Net income ( OMR 14,250 ) was done. Further to this the chances of utilizing the individual entry system along with suggestions to forestall the loss of accounting informations has besides been explained in item.

4. Mentions

  • Kohler, E. L.

    ( 1970 ) . A dictionary for Accountants. Englewood Cliffs: Prentice-Hall.

  • Hanif et Al. ( 2003 ) . Fiscal Accounting. India: Tata – McGraw Hill Pubicaton.

    p21-23.

  • Jayapandian, S. ( 2004 ) . Fiscal Accouning from Zero. India: Excel Books. p24-33.
  • Baker, J ( 2008 ) .

    twentieth Century Bookkeeping and Accounting. Soviet union: Ripol Classic Publishing House. p289-291.

  • Maheshwari, S ( 2009 ) . Fundamentalss of Accounting for Cpt. India: Vikas Publishing House Pvt Ltd. p45-48.
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