What is single-entry accounting?
submitted by Girma

giggity127

It's an accounting system for simple businesses. It's just the basic income and expenses, usually including cash, accounts payable, accounts receivable, and taxes.

For many small businesses, this is sufficient, but for most corporations this system doesn't give you the information you'll need.

Arnold

A good way to lose track of your income and expense.

jenkins

Single-entry accounting is basically a like keeping a checkbook register. It's just the basic tracking of cash flowing in and out of the business. It’s straightforward and easy to manage, which is nice for smaller companies, like startups. The upside is that you're spending less time keeping the books. The downsides are the lack of detail in your records.

Because single-entry only records basic income and expenses, there's information missing. For example, it won't help you analyze assets and liabilities. You can't make detailed financial statements like balance sheets or income statements. That’s why larger businesses, especially those with inventory, use double-entry.

If you have money that's owed to you, you're working on a cash basis, so it's not easy to find on your books. However, if you use software with double-entry, it's easy to pull up your accounts receivable and see how much you can expect customers to pay in the next little while. It gives you that extra dimension of information that's missing when you only track actual cash flow. If you've got credit purchases, single-entry won't do. There's just no place to record that kind of transaction.

spellington

Single entry has some big limitations when it comes to financial analysis. You don't have a financial statement for anyone to look at, so getting a loan from the bank gets difficult.

If you want to raise capital, you won't have enough financial data for potential investors to look at.

For tax reason, double-entry is better because it shows more detail. There are two parts to every transaction, so it's easier to have an audit trail that shows where your money went. Auditors will have an easier time seeing what you've done.