Capital Controls: Meaning, Types, Benefits and Downside
What are Capital Controls ? Capital controls are when the governments of nations restrict the inflow and outflow of capital into the economy. In a free market economy, there should be and would be no borders. However, this is not the case in reality. Countries want to ensure that their economies stay relatively stable in […]
The Amazon Divorce Deal
In April 2019, the stock price of Amazon had taken a beating because of the news of the divorce of its billionaire founder. Jeff Bezos, the charismatic billionaire founder of the company, was reportedly involved in an illicit romantic relationship with an acquaintance. When the news of this relationship reached Jeff’s wife Mackenzie Bezos, she […]
The Gap-Old Navy Breakup
Economies of scale provide a significant advantage in the retail industry. This is the reason why all retail companies try to become bigger. However, to the surprise of many American retail giant GAP Inc has decided to reduce its size. GAP is home to many famous brands like GAP, Banana Republic, Old Navy, Athleta, Intermix, […]
How Buy Now and Pay Later (BNPL) Works in the Retail Industry?
The retail industry has been constantly innovating in order to become financially more viable. There are several innovations which have been introduced in the retail industry. However, very few innovations have been as effective as the Buy Now Pay Later (BNPL). The use of Buy Now Pay Later (BNPL) payments has been increasing over the […]
What is Commercial Banking?
The banking industry is a highly specialized field. To the layman, it may appear like all banks perform the same function. However, this is not the case. There are a wide variety of departments within a bank that perform different functions. Commercial banking is one such department. In most banks, it functions like a different […]
Single entry accounting systems record only one side of every transaction. This happens because they use one entry to record every transaction. Therefore single entry system does not use nominal and real accounts. The emphasis is on cash and accounts receivable.
Single entry accounting system can be described as a system that businesses use to get by rather than something that companies may find desirable.
Single entry system is used by small firms that have just started business. Such firms do not have the resources that are required to put up a full-fledged accounting system in place. Hence they begin with a single entry accounting system. However as and when their business grows most firms are compelled to adopt the double entry system. This is because the single entry system is highly inefficient and can be used only by sole proprietors when the scale of business is very small and the transactions to be undertaken are not very complicated.
The biggest problem with single entry bookkeeping system is that of incomplete records. Single entry system records only transactions that the firm is undertaking with external parties. There are numerous transactions within the firm that are of vital importance and need a place in the financial statements. However, the single entry system ignores these needs and gives incomplete information to the management.
Single entry accounting system does not have provisions for reconciliation of accounts. This means that the system does not have inbuilt error detection. Therefore, if a clerk is doing the task of making entries in the book, the system may be prone to clerical errors. This could lead to management having insufficient information or no information when they have to make decisions.
Single entry accounting system is highly prone to frauds and embezzlement. There is only one book of account rather than an elaborate accounting system. Hence, the internal checks are few. In fact they are non-existent. The person making the accounts could single handedly manipulate the books of accounts and misappropriate the resources of the firm.
To counter this problem, Luca Pacioli and other merchants of Venice created the double entry accounting system. This system proved to be very effective and useful and soon became the gold standard for the industry.
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An Overview of Contracts and Why They are Important to Business and Society
February 12, 2025
