Understanding The Difference Between Single And Double Entry Methods
Both single entry and double entry are the two basic ways used in recording financial transactions in accounting. Each has a different understanding. Meanwhile, if you need to keep track of the accounting management of your company when you’re on a business trip, we recommend you to hire a trusted MYOB maroochydore.
Single Entry or can be interpreted as a Single Record is a method of recording financial transactions that are only done once. Only the list of transactions that affect the cash account is recorded in the single entry method. This means that cash receipts are recorded as cash in, while cash payments are recorded as cash out. The single entry method is usually used by small businesses where the balance sheet is not required for financial control and tax purposes.
On the other hand, Double Entry is a method of recording financial transactions carried out twice, namely on the debit and credit sides. The double-entry method is required for all businesses that must produce an income statement and balance sheet.
For a business to decide whether to use the single entry or double entry method depending on the type of business being run. Initially, the single entry was used by the government of some countries as the basis for bookkeeping. This is reasonable because using a single entry is much easier and more practical. However, due to the high demand for good public governance, the change in the recording system to double entry needs to be implemented because with this recording system a complete and auditable financial report can be produced.
Outside of government, small businesses with sole ownership or home-based businesses may not need a double entry method to record financial transactions, and usually, small business owners don’t start their business with this method.