Single-Entry Bookkeeping

1. Definition

Single-Entry Bookkeeping is a simple accounting method where each financial transaction is recorded as a single entry in a journal or log.

It is essentially a list of income and expenses, similar to a checkbook register or a personal household ledger.

2. Key Principle: Simple Listing

Unlike double-entry bookkeeping which tracks both cause and effect, single-entry bookkeeping focuses primarily on Cash Flow.

• Focus: Tracks revenue and expenses to calculate a running balance of cash.
• Format: Typically consists of columns for Date, Description, Income (Deposit), Expense (Withdrawal), and Balance.

3. Example (vs. Double-Entry)

Consider purchasing a laptop for business use for $1,000.

A. Single-Entry

• Entry: "Dec 27 | Bought Laptop | Expense: $1,000 | Balance: $500"
• Characteristic: It records the cash outflow but does not formally record the laptop as a new asset on the books.

B. Double-Entry

• Debit: Equipment (Asset) +$1,000
• Credit: Cash (Asset) -$1,000
• Characteristic: It records the exchange of value: Cash decreased, but Equipment increased.

4. Advantages

• Simplicity: No need to understand complex accounting rules like debits and credits.
• Cost-Effective: Can be maintained easily using a spreadsheet or a notebook, making it ideal for small businesses, freelancers, or personal finance.

5. Limitations

• No Error Detection: Since there is no balancing mechanism (Assets = Liabilities + Equity), mistakes and omissions are hard to spot.
• Incomplete Picture: It tracks cash well but fails to track assets (inventory, equipment) and liabilities (loans, accounts payable), making it impossible to produce a proper Balance Sheet.