Systems of Accounting
There are mainly two kinds of system of accounting for recording business transactions. They are Cash System of accounting and Mercantile system or Accrual system of Accounting.
1. Cash System of Accounting
Under the cash system of accounting, only actual cash transitions are recording in to the account. That means actual cash received and cash paid are recoded properly and no entry for any due of receipts and outstanding expenses.
2. Mercantile system or Accrual system of Accounting
Under Mercantile system of accounting, all the cash transactions and credit transactions of the business are recorded in the books of accounts. This will create the entries not only for actual cash receipts and payments but also for amount due and outstanding expenses. This is the system which all the commercial business organizations are follows.
Along with the above shown systems of accounting we can record the business transactions in two other important systems also. They are Single Entry System and Double entry systems.
3. Single Entry System
Single Entry System is a system which records only the personal and cash aspects of the business. Under this system of recording ignores impersonal aspects of transactions. This is not based on the Dual aspect Concept so it will be incomplete account or inaccurate account.
4. Double Entry System
This is a dual aspect concept of business transactions that is receiving aspects (debit) and giving aspects (credit) are recorded in the books of accounts. This is the most common system of book keeping used for recording every business transactions. Double entry system is the method of making all transactions in the account in an opposite side for equal value. This system of accounting provides more accurate data with scientific system of accounting.
Difference between Single Entry System and Double Entry System of Accounting are as follows:-
1) In Double Entry System of Accounting, the double aspects of the transactions are recorded. But in the case of Single Entry System, only single aspects is recorded.
2) In Double Entry System of Accounting, For every debit aspect will have an equal amount of credit aspect. But in the case of Single Entry system, there will have a debit without a corresponding credit and vice versa.
3) In Double Entry System of Accounting, there are personal and impersonal accounts (ie, real and nominal accounts). But in the case of Single Entry System, there are personal and cash accounts only.
4) Under Double Entry System of Accounting, a trial balance can be prepared to check the accuracy of accounts While in the single entry system, it cannot prepare the trial balance.
5) Under Double Entry System of Accounting, the Trading, profit and loss account and balance sheet can be prepared directly. But the single entry system those statements cannot prepared directly.
6) In double entry system we can directly calculate actual net profit of the business. But in the case of single entry system it is not easy to calculate actual net profit of the business directly.
7) In Double Entry System of Accounting, it involves more clerical labours, But there are only less numbers of clerical labours in the case of Single entry system.
These all are the difference between Single entry system of Accounting and Double entry system of accounting.