Incomplete Records
In Contrary To Double Entry

Single Entry System Meaning:

Single Entry System of Accounting or Accounts from Incomplete Records is a system in which accounting records are not maintained according to double entry principle of book keeping.

Contrary to Double Entry System of Accounting, under Single Entry System, no set rules are followed - even the books of accounts that are to be maintained are not certain. Normally, under this system, only Cash Book and personal ledgers are maintained Real Accounts and Nominal Accounts are not. Since both the aspects of transactions are not recorded, the system is known as "Accounts from Incomplete Records" or "Single Entry System of Accounting".

Statement Of Affairs:

A Statement of Affairs is a statement of assets and liabilities of an organization prepared to project the financial position of the concern on a particular date.

Difference Between Statement Of Affairs And Balance Sheet:

Though a statement of affairs looks like a Balance Sheet, there prevails few fundamental differences between these two:

  1. A Statement of Affairs prepared under the single entry system. But a Balance Sheet is prepared under Double Entry System
  2. The accuracy of Statement of Affairs cannot be assumed as both the sides of the statement do not automatically tally. But in case of Balance Sheet arithmetical accuracy of the books of accounts can be assumed as both the sides agree automatically.
  3. A Statement of Affairs is prepared partly from a trader's books, partly from other sources of information. But a Balance Sheet is prepared from the set of books kept according to the double entry system.
  4. In a Statement of Affairs, creditors are classified into unsecured, fully secured, partly secured and preferential creditors. But in a Balance Sheet no such classification is made.
Features Of Statement Of Affairs:
  1. Normally Personal Accounts are prepared.
  2. Cash Book records both business and personal ledger.
  3. A Statement of Affairs is prepared partly from a trader's books, partly from other sources of information.
  4. There is no uniformity in procedure in maintaining records.
  5. Usually it is found with a sole trader or a partnership firm.
Advantages Of Statement Of Affairs:
  1. It is a very simple method of recording business transactions.
  2. Less expensive as technical expertise is not required.
  3. It is suitable for small businesses with mostly cash transactions
  4. It is suitable for small businesses with few assets and liabilities exists.
  5. Flexible method as there are no set procedures and principles followed.
Disadvantages Of Statement Of Affairs:
  1. The biggest disadvantage of using the statement of affairs method is lack of accuracy of profit and losses.
  2. There is a lack of detailed information on business expenses.
  3. Unlike a double-entry system, the statement of affairs method uses no trial balance
Total Debtors And Total Creditors Account:

Under Net worth method profit or loss of the business is determined by making comparison between the capitals of two dates of a period.

For example,

Capital as on 1st January 2012 = 100000

Capital as on 31st December 2012 = 150000

Profit for the year 2012 = Closing capital - Opening capital

= 150000-100000 = 50000

Other capital related items such as drawing, additional capital, interest on capital etc. are to be adjusted to ascertain the amount of profit or loss.

The Net worth method of accounting under Single Entry System of Book-Keeping does not provide a clear picture of the operational results of a business. It does not reflect the total figures of sales, purchases, etc. of the business. As a result, neither a clear and meaningful analysis of the financial statements can be obtained nor effective measures can be adopted to improve the financial position of the business.

It will, therefore, be better to collect all, such information from the books of accounts on the basis of double entry system of accounting. Such a method of collection information as per the requirements of the double entry system of Book-keeping is termed as "Conversion Method".

      Under the Conversion Method of Single Entry System of Book Keeping, Total Debtors Account and Total Creditors Account are prepared to ascertain the balance of total value of debtors and creditors at the beginning of the year or at the end of the year.

1. Ascertainment of Sales:

Sales may be of two types

(i) Credit Sales, and

(ii) Cash Sales.

Credit Sales should be found out by preparing a Total Debtors Account

while cash sales should be found out from the Cash Book.

2. Ascertainment of Purchases:

The purchases may be of two types (i) Credit Purchases, and (ii) Cash purchases. The amount of credit purchases can be ascertained by preparing a Total Creditors Account.