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CHAPTER Accounts from Incomplete
CHAPTER

20 Records—Single Entry System

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Incomplete It is a system of recording business transactions. In some of the
Records transactions, both aspects are recorded; while in others one aspect is
recorded or it is not recorded at all.
2. Single Entry It is an incomplete double entry system varying with circumstances.
System

3. Statement of It is a statement of assets and liabilities. The difference between the amounts
Affairs of the two sides represents proprietor’s capital.

4. Capital Amount invested by the owner.
5. Drawings Money or goods taken by the proprietor from the business for his/her
personal use.

CHAPTER SUMMARY

• Accounting records that are not prepared according to the double-entry principles are known
as Accounts from Incomplete Records or Single Entry System of Accounting.
Single Entry System is a system under which accounting record is not maintained following
the Double Entry System. It is a system of book keeping in which only records of cash and
individual accounts of parties are maintained.
Single Entry System is simple, economical and time saving system of recording transactions.
• Disadvantages of Single Entry System are: (i) Arithmetical accuracy of accounts cannot be
checked; (ii) Difficult to detect fraud; (iii) True profit cannot be known; and (iv) True financial
position of business cannot be ascertained.
• Ascertainment of Profit/Loss by Statement of Affairs Method: Under this method, to
find out the capitals on the opening and closing dates, the Accounting equation ‘Capital =
Assets – Liabilities of Outsiders’ is used and statement of affairs prepared accordingly. Proper
adjustments regarding drawings, further capital introduced, depreciation, etc., are made to
closing capital and then true profit earned or loss incurred is ascertained.
In this method, we take following steps for calculating profit/loss:
Step 1: Ascertain closing capital by preparing a Statement of Affairs at the end of the
accounting period.