What are the differences between single entry bookkeeping and double entry bookkeeping?

Single-entry and double-entry bookkeeping are two of the most common types of tracking financial assets of a company.   The single-entry style is geared toward small businesses using the cash basis accounting. This means, the company accounts for profit or loss when it impacts the company. The accrual method, usually used with double-entry bookkeeping, accounts for profit when it’s earned rather than when it’s received and losses are accounted for when they occur. As the name...

Single-entry and double-entry bookkeeping are two of the most common types of tracking financial assets of a company.   The single-entry style is geared toward small businesses using the cash basis accounting. This means, the company accounts for profit or loss when it impacts the company. The accrual method, usually used with double-entry bookkeeping, accounts for profit when it’s earned rather than when it’s received and losses are accounted for when they occur. As the name implies, single-entry bookkeeping requires the account to only show one entry for each financial transaction, much like a check ledger. A running total on the bottom of the account shows the financial balance of the liquid assets on hand. It is a good style for small or cash intensive businesses with little inventory or company owned assets. However, a major drawback is the lack of oversight. Accounting errors may not be discovered for days, months or years.

Double-entry bookkeeping requires two entries for each transaction; a credit and a debit. This system is better for more complicated business where profit is actually realized after it is earned. For example, if a client is delivered goods the profit is earned but it is not realized until the client pays the money. Single-entry would only account for it when paid, but double-entry allows the company to count the profit immediately because it will be paid in the future. The double-entry accounting allows for a more complete financial understanding of the companies actual liabilities and assets.