There are two systems for recording transactions-double and single entry. The double entry system was involved by "Lucas Pacioli" of Italy in 1494 in Venice but developed in England.
A double-entry system is based on the fact that a transaction is a double-sided affair. If one receives something then either (a) some person has given it, or (b) stock of something else has reduced, or (c) some service has been rendered. On the other hand, if one loses something then a corresponding benefit must have been received. Hence in a double-entry system, each transaction should be recorded in both aspects.
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A single entry system on the other hand is concerned with only one side of the transaction, either you pay someone or you receive from someone. Single entry sounds economical but is an inaccurate, unscientific, and unsystematic system of maintaining accounts.
A double-entry system is based on the fact that a transaction is a double-sided affair. If one receives something then either (a) some person has given it, or (b) stock of something else has reduced, or (c) some service has been rendered. On the other hand, if one loses something then a corresponding benefit must have been received. Hence in a double-entry system, each transaction should be recorded in both aspects.
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| Features of Double Entry System |
A single entry system on the other hand is concerned with only one side of the transaction, either you pay someone or you receive from someone. Single entry sounds economical but is an inaccurate, unscientific, and unsystematic system of maintaining accounts.
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| Features of Single Entry System |
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Cash v/s Mercantile System
In the cash system of accounting entries in books are made only when cash is received or paid. No entry is made when a payment or receipt i.e. merely due. On the other hand in a mercantile system, a recorded is made on the basis of amounts having become due for payment or receipt. For example, assume that the royalty of an author becomes due on the 30th of June but is paid on 30th October. If the accounts are closed on 30th June, no entry will appear on this date if accounts are maintained on a cash basis. However, an entry will be made on the date of payment (that is on 30th October), debiting the royalty account, and crediting the cash account. On the Other hand, if accounts are kept in the mercantile system, two entries will be done as under follows:- On 30th June, showing the expenses by way of royalty having been incurred and liability in this regard having arisen; and
- On 30this October, showing that the liability has been settled.