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What are single-entry accounts and what do they mean to your business


Most people are first introduced to single-entry accounts when they first learn to use a checkbook.The checkbook register is a classic single-entry account, where each line is either an amount of money subtracted from the account (when you write a check) or added to your account (when you make a deposit).To find out how much money is in your account, you just add up the columns and add that amount to the amount that you started with.In business, there are single-entry accounts also, and they are just that easy.However, the single-entry account is rarely used by accountants so as you might expect, there are both advantages and disadvantages or a single-entry system.

The main benefit for the single-entry system is that it is super easy to use.It actually is as easy as keeping a checkbook and if you know how to balance a checkbook, you know how to balance the books for your company.You just have to remember to write down what come into or goes out of the business coiffeurs and be sure to write down absolutely everything.You also have to remember to make sure it is written in such a way that you know the difference between the positive entries and the negative entries.On of the most common ways to distinguish between positive and negative entries is to enclose the negative entries in parentheses.In a very simple business with few transactions, this might be ideal.

Most businesses use a double-entry system and most accounting books and software have a column for debits and a column for credits.One of the reasons that this method is more preferred, even though it is more cumbersome, it that it allows for more detailed financial information.If you are using a single entry system, you will not be able to track asset and liability accounts.Because of the nature of the accounts, accounts such as inventory, accounts receivable, and accounts payable will need to be tracked separately in a single-entry system.

Another drawback to a single-entry system is that errors are extremely difficult to detect.Even if you are using a spreadsheet and letting a computer program do your math for you, there is still the possibility of failing to indicate the direction of one of your entries.No amount of adding and reading will fix this problem and you will probably end up spending time justifying your records with your bank statement, trying to find the error.Not time well spent!

Finally, if you are keeping a single-entry account, you will end up with a number of different accounts.If you have petty cash, you will most likely make a withdrawal for the cash and then start another account for the petty cash, monitoring it as it comes and goes.If you are using a double-entry system, all accounts can be handles through one (double) account.In the long run, it is much easier to have only one (double) account than to handle several (single) accounts.

When you use a double-system you will prevent mistakes form occurring.One reason for this is that every entry into your system will be made not once but twice.What the system does, essentially, is make an inverse record of a single-entry account.Now, instead of entering your rent payment a ($1,440), it gets entered into a credit account (-1,440) and into a debit account ($1,440).Getting used to a double-entry system might seem a little awkward and contrived.However, once you get used to it, you will probably come to understand why it is the preferred system for business and other organizations that deal with money.This system allows you to double check your numbers all of the time.

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