Single Entry Bookkeeping Definition

Single entry bookkeeping is one of the simplest methods of accounting and recording transactions. This is sometimes adopted by small businesses, or those that make transactions less often, and is relatively low maintenance.

While convenient, single entry bookkeeping is not the most effective way to record transactions. A far more reliable and accurate way of bookkeeping is using the double entry method. With the right support and training, even those new to accounting can employ double entry bookkeeping. In this guide, we will detail how to use both methods, highlighting the pros and cons of each along the way.

How to use single entry bookkeeping

If you do decide to use single entry bookkeeping for your business, it is extremely important to record the data correctly, as this method is more prone to error. To begin, record your starting balance (you should also do this at the beginning of each tax year). Next, add the income generated from the transaction, subtract the expenses, and calculate the remaining balance. These should be noted in separate cells or fields.

Here is a simple example of single entry bookkeeping:

Date

Description

Starting Balance

Income Made

Expenses

Remaining Balance

22/04/2022

Week 1

£10,000

£5,000

£4,000

£11,000

 

No matter how you prefer to format your single entry bookkeeping, it is important that you  include all the necessary financial information. Transaction journals can be done digitally or on paper, and are generally low maintenance, requiring easy and consistent input of data. 

Double entry bookkeeping

A slightly more advanced alternative to single entry bookkeeping is double entry bookkeeping. While this requires a better understanding of accounting, it is still very simple.

Double entry bookkeeping involves recording credits and debits in two accounts rather than one, with both returning an equal - or balanced - result. 

Recording and calculating transactions using double entry bookkeeping involves a simple accounting equation that adds liabilities (what a business owes) to the equity (value of the owners’ investments in the company) to work out the assets (how much money the company holds). 

Here is a simple example of double entry bookkeeping, which is recorded in a journal:

Account

Debit (outgoings)

Credit (incomings)

Cash

 

£500

Rent

£500

 

 

This method allows you to oversee and manage your expenses while balancing them with incomings to accurately keep track of your finances and reduce errors.

Unlike single entry bookkeeping, double entry bookkeeping enables you to see a full and accurate picture of your business’ finances, which is extremely beneficial for things like business audits and book balancing.This is another reason why we recommend familiarising yourself with the double entry method.

Sherlock & Co can help

If you are struggling to understand the different methods of accounting, or are unsure which one to employ, our experienced accountants can help. To speak to a member of our team, call 0161 330 3067, or complete an enquiry form, and we will get in touch at a time convenient for you.

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