Disadvantages of the Single-entry System:
The single-entry system of book-keeping is defective in many respects. The main defects are:
1. This system is an incomplete system of book-keeping, because the two aspects of each and every transaction are not recorded in the books of accounts under this system.
2. As the two aspects of each and every transaction are not recorded, it is not possible to prepare a trial balance and verify the arithmetical accuracy of the books of accounts.
3. As the arithmetical accuracy of the books of accounts cannot be checked by preparing a trial balance, it gives much scope for carelessness, misappropriation and fraud.
4. As the accounts of purchases, sales, returns expenses and incomes are not kept under this system, it is not possible to prepare a trading and profit and loss account to find out the correct profit or losses. The profits or losses are ascertained under this system only by comparing the capital at the end of the trading period ((i.e., closing capital) with the capital at the beginning of the trading period (i.e., opening capital). The profits or losses ascertained by comparing the closing capital with the opening capital are inaccurate and unreliable.
5. As no real accounts (other than cash account) are maintained under this system, it is not possible to prepare a balance sheet for ascertaining the correct financial position of the business. The financial position of the business is ascertained under this system by preparing a statement of affairs. The statement of affairs prepared under this system does not reveal the correct financial position of the business, because the values of various assets and liabilities shown in the statement of affairs are not proved by accounts, but are calculated mainly by physical inspection and estimate.
The single-entry system of book-keeping is defective in many respects. The main defects are:
1. This system is an incomplete system of book-keeping, because the two aspects of each and every transaction are not recorded in the books of accounts under this system.
2. As the two aspects of each and every transaction are not recorded, it is not possible to prepare a trial balance and verify the arithmetical accuracy of the books of accounts.
3. As the arithmetical accuracy of the books of accounts cannot be checked by preparing a trial balance, it gives much scope for carelessness, misappropriation and fraud.
4. As the accounts of purchases, sales, returns expenses and incomes are not kept under this system, it is not possible to prepare a trading and profit and loss account to find out the correct profit or losses. The profits or losses are ascertained under this system only by comparing the capital at the end of the trading period ((i.e., closing capital) with the capital at the beginning of the trading period (i.e., opening capital). The profits or losses ascertained by comparing the closing capital with the opening capital are inaccurate and unreliable.
5. As no real accounts (other than cash account) are maintained under this system, it is not possible to prepare a balance sheet for ascertaining the correct financial position of the business. The financial position of the business is ascertained under this system by preparing a statement of affairs. The statement of affairs prepared under this system does not reveal the correct financial position of the business, because the values of various assets and liabilities shown in the statement of affairs are not proved by accounts, but are calculated mainly by physical inspection and estimate.
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