Tag: double entry system

Under single entry system Books of accounts are not maintained hence, Trial Balance is not Possible to Prepare.

Profit or loss earned by the business under single entry system is based on the difference between its Opening and closing capital.
To ascertain this capital Statement of affairs are prepared.

Single Entry System of Accounting, also known as Accounting from Incomplete Records, is a non-standard and non-scientific system of accounting. This system is adopted by small businessmen as they do not have enough capital and expertise to employ the standard double entry system of accounting in their business.

Sole proprietorship is type of enterprise that is owned and run by one natural person and in which there is no legal distinction between the owner and business entity. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debt, loans, loss, etc.

For a Sole Proprietor, income tax is not an expense incurred to generate revenue hence it is not treated as an expense to be paid out of profits. In this case, income tax is treated as a personal expense resulting in drawings from the business concluding to a reduction of capital.

Bookkeeping allows investors to have up-to-date and accessible information. Investors will be able to make better, well informed, decisions which is the ultimate purpose of bookkeeping. Bookkeeping is not only for current investors but for future investors too.

The above statement is true.