8 Disadvantages of Single Entry System

Under a single-entry bookkeeping System, we maintain only cash and private accounts. On the other hand, real and nominal accounts are completely ignored. In other words, we can say that following the only Entry System, we don’t prepare subsidiary books (such as Purchase Day Book, Sales Day Book, Purchase Returns, and Sales Returns Book) and ledgers accounts. Often accountants regard a single-entry bookkeeping System as an unscientific method of maintaining records because the practice that’s followed during this system is unsystematic and unorganized. The Main Disadvantages of Single Entry System are

Disadvantages of Single Entry System

Does not ensure Arithmetical Accuracy: Under this system, Trial Balance is not prepared; therefore, it becomes extremely difficult in verifying and checking the arithmetical accuracy of the books of accounts so prepared. This successively encourages frauds and manipulations.

Unsystematic or Unscientific System: As the dual aspects of the transactions are not recorded, so this system is considered to be incomplete or unscientific.

Lack of Control over the Assets: As real and nominal accounts are not prepared, so it is difficult to keep a proper account of the assets. This may lead to misappropriation, fraud, and embezzlement of assets.

Difficulty in Detection of Errors and Frauds: Since a proper accounting system is not followed, the books of accounts fail to reveal the clear financial picture of the business. This may further encourage the probability of undetectable errors and frauds.

Accurate Profits or Losses cannot be determined: Under this system, the profits or losses so determined are merely an approximation and not the actual figures. Thus, the Single Entry System is not capable of depicting the true financial position of a business.

Comparative Study not Possible: One of the major drawbacks of this system is that it fails to compare the current year’s performance with that of the previous year. Thus, meaningful comparative studies and analysis cannot be laid.

Fails to work out Growth of Business: the particular performance of a business is expressed and measured in terms of profits and losses. Since the Single Entry System is incapable of revealing the actual profit or loss figures; therefore, this system fails to enable the users to assess the actual performance of the business.

Unacceptable to Tax Authorities: The books of accounts maintained by following the Single Entry System are not accepted by the tax authorities on any grounds. This is because these books are not maintained by following universally and lawfully accepted accounting principles.

Also, Read 6 Advantages of Single Entry System

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