| In the world of bookkeeping, there are two different | | | | 1. A check against a bookkeeping error including theft |
| systems commonly used by businesses, big and small, | | | | are automatically provided when transactions are |
| to record financial transactions. They are single-entry | | | | recorded and the total amount of debit entries equals |
| and double-entry bookkeeping. Both systems “get | | | | the total amount of credit entries. |
| the job done,” but it depends on what your personal | | | | 2. The preparation of financial statements can be |
| preference dictates. However, unless you’re a | | | | created with ease due to the accurate and continuous |
| small business with simple transactions then | | | | calculation of profit (credit) and loss (debit). |
| double-entry bookkeeping will be the most beneficial to | | | | 3. With both entries recorded (sales and purchases) |
| you and your company’s financials. | | | | you can track who owes the company money and |
| Single-entry bookkeeping is similar to a checkbook | | | | who the company owes money to more easily. |
| register where only a single line transaction is recorded, | | | | 4. The company’s financial position is clearly |
| reflecting the credit or debit of cash. This simple way | | | | illustrated and can be accessed quickly for effective |
| of keeping track of your money is less expensive and | | | | business planning. |
| can be maintained in less time and with less effort. | | | | 5. With a higher degree of required entries, |
| Single-entry bookkeeping only takes into account | | | | double-entry bookkeeping has a strict approach |
| records of cash, accounts receivable, accounts | | | | creating detailed records of all assets so that your |
| payable and paid taxes. More in depth records such | | | | company doesn’t lose track of any income. |
| as assets, liabilities, inventory, expenses and revenues | | | | 6. Double-entry bookkeeping takes internal |
| are not maintained, thus leading to an inadequate | | | | transactions such as entry adjustment into account |
| portrayal of your financial records. This is where | | | | which provides more accurate information at the end |
| double-entry bookkeeping comes into play. | | | | of the fiscal year. |
| Double-entry bookkeeping, which has been around | | | | 7. Omission of important data is never a problem |
| since the 1400’s and is the basis of general | | | | because each transaction is recorded twice in two |
| accepted accounting principals, is a little more | | | | separate columns. |
| involved. Instead of only one transaction in one | | | | While the benefits have been reduced greatly due to |
| column, double-entry makes two entries for every one | | | | introduction of computerized systems, double-entry |
| transaction. A credit entry is made for revenue | | | | bookkeeping will still be more practical when it comes |
| brought into the company and a debit entry for every | | | | to detecting fraud and errors. Whether you are a |
| transaction paid. In the end, these two entries will | | | | single or a double-entry bookkeeper, as long as |
| offset each other so that both sides will add up to | | | | you’re maintaining your financial records correctly, |
| zero. With this in mind, double-entry accounting | | | | then continue crunching those numbers and getting the |
| provides the following advantages over single-entry | | | | results you desire. |
| bookkeeping: | | | | |