Ledger.—The single-entry ledger is the same as the double-entry and uses the debit and credit principle of double entry. As stated above, accounts are kept only with persons, including the proprietor. It is seen, therefore, that single-entry books make a record of all transactions but fail to analyze all those transactions in their relations to one another and in their effects upon the business.
Single Entry as Adapted to Modern Needs.—Recognizing the value of the analysis secured by double entry but overestimating the work required to make the record, some concerns have developed single-entry systems through use of subsidiary records and columnar books, from which they derive very full information for management purposes. A sales journal gives volume of sales, a purchase journal shows the amount of goods purchased, and analytic columns in the cash book show the main sources of receipts and their amounts, and the main classes of expenditures and their amounts. A bill book is used for recording notes receivable and payable, and inventory books for scheduling all kinds of property, assets and liabilities. All of these make a system approaching the double entry in completeness of detailed information, but one which lacks the fundamental principle on which the double entry rests, viz., an equality of debits and credits brought about by a classified analysis of every transaction into its debit and credit elements at the time of first entry on the books. It does not tie together the whole into a mathematically provable system.
Since the advent of double entry there have always been strong adherents to the single-entry method. An early writer, William Perry, presented in 1777 a treatise on bookkeeping by either method. Most small enterprises, even if they keep their records by the single-entry method in the beginning, usually adopt the double-entry system as their business increases, realizing that the latter furnishes better accounting control than is obtainable under simple entry.
Debits and Credits.—To one who knows the double-entry method, single-entry bookkeeping presents few difficulties. Debit and credit as applied to personal accounts are usually of easy determination and are exactly the same as in double entry. The debits and credits for cash are based on the same principles in both systems. The method of writing them in the books of original entry was sufficiently indicated where those books were explained. Posting is done just as in double entry. With regard to all work upon single-entry books, there is always a temptation to do slovenly, inaccurate work because the system does not provide internal proof as the double-entry system does. Thus, where rebates have been allowed, only the net amount received may be shown in the cash book with explanation that the payment is in full of account. After this amount is posted to the customer’s account, the item does not fully offset the original debit and it is necessary to make a note in the ledger to the effect that the item is fully settled. The same thing holds true for creditors’ accounts. Of course, this is not good bookkeeping whether practiced in single or double entry.
The Proprietor’s Account.—The handling of the proprietor’s account under single entry is very similar to that under double entry. The proprietor’s capital account shows the original investment on the credit side; his personal account, if kept separately, is debited with his withdrawals, whether in merchandise or cash. Inasmuch as the single-entry ledger does not show the profit or loss, the manner of handling the proprietor’s account at closing is somewhat different. The profit, as determined by the method shown a little later, may be brought directly and without journal entry from the statement of profit and loss into the proprietor’s capital account so that this account will show the true net worth of the business as at that time. The personal account is simply ruled off after its figures have been used in determining profit.
Proof of Posting.—The only proof of work possible under single entry is a checking of the secondary record against the original. A trial balance of the ledger cannot be taken. A schedule or list of account balances may be prepared and debit and credit totals of the list made. This compared with a similar list prepared at the close of the last period will show the changes that have taken place during the current period. A list of the debits and credits to personal accounts in books of original entry for this period must check against the net change shown by the above comparison. Virtually this amounts to a second posting of the items, and if the two postings agree, the presumption is that the ledger is correct. The use of the “personal” posting column for the cash book as explained above, and of similar columns in sales and purchase journals, makes possible a much easier debit and credit summary of the books of original entry if some proof of posting is desired.
Profit and Loss.—Inasmuch as many of the factors affecting the net worth have not been analyzed in making the original entry, no detailed showing of profit and loss, as understood under double entry, can be made. It is, of course, possible to go back over the books and make such an analysis, but this would result practically in rewriting the books on a double-entry basis. Single entry, therefore, has recourse to another method which is characterized by a complete inventory-taking and appraisal. It is sometimes called the “asset and liability method” as explained in the following sections.
Inventory and Appraisal.—A physical inventory or count of all assets, fixed, current, and deferred, is made. The books furnish only the accounts receivable and the cash. All other assets are usually made up by physical count and reappraisal. It is consequently very easy to lose sight of some assets, particularly in the case of additions and betterments to existing assets. For the deferred items, the inventory of supplies on hand supplemented by the proprietor’s memory is the customary source.
Liabilities.—Liabilities are more difficult of correct determination. The accounts payable are shown on the ledger, the notes payable should be shown in the bill book or by stubs in the bound blank book of notes. Any unpaid bills may be found in the current file of unpaid invoices if one is maintained. For all other liabilities, including deferred income, the memory must serve. The haphazard manner in which this statement must be made up is therefore apparent.
Accrued and Deferred Items.—There is usually little or no notice taken of accruals and deferred items on account of the difficulty in securing trustworthy and full information. The theory of averages, viz., that these items at one period will offset, in the long run, those at another, is the theory by which the failure to include accruals and deferred data is excused. A comparison of this method with the double-entry method for handling similar items throws into strong relief the inaccuracies of the single-entry method.