Single vs Double Entry Accounting – Complete Guide (2025)
📑 Table of Contents
Introduction: Why This Topic Matters
I often ask fellow accountants, “How many years of experience do you have?” They proudly reply: 10, 15, even 25 years.
But when I ask — “What’s the basic difference between single and double entry? ” most go blank or say, “Everything runs on computer now.”
Bhai! These basics give us our bread & butter. Let’s quickly explore single vs double entry, see advantages, journal format, ledger posting, and solve practice problems.
💡 Share this with colleagues — let’s upgrade accounting literacy together!
What is Single Entry System?
The single entry system is a simple, one-sided method of bookkeeping. Only the cash book and some personal accounts are recorded, while other ledgers like sales, purchase, and expenses are not maintained systematically.
Key Features
- Partial record: Records only receipts and payments, often just cash and personal accounts.
- No trial balance: Difficult to check arithmetic accuracy.
- Not suitable for statutory compliance: GST, tax, and audit require full books.
When Single Entry Mode is Applicable
- Small shopkeepers or petty traders
- Freelancers or very small service providers
- Businesses with very few transactions where maintaining double-entry is not cost-effective
Advantages vs Disadvantages
| Advantages | Disadvantages |
|---|---|
| Easy and inexpensive to maintain | Does not present full financial position |
| Requires no specialized accounting knowledge | Cannot prepare accurate Profit & Loss or Balance Sheet |
| Time-saving for very small entities | Prone to manipulation and fraud |
| Simple record-keeping suited to low volumes | Difficult to raise bank loans (no proper books) |
Example: Simple Cash Book (Single Entry)
| Date | Particulars | Receipts (₹) | Payments (₹) | Balance (₹) |
|---|---|---|---|---|
| 01-Apr | Opening Balance | 10000 | 10000 | |
| 02-Apr | Rent Paid | 5000 | 5000 | |
| 05-Apr | Sales | 8000 | 13000 | |
| 07-Apr | Stationery Purchase | 1500 | 11500 | |
| 10-Apr | Commission Received | 2000 | 13500 | |
| 12-Apr | Electricity Bill | 1200 | 12300 | |
| 15-Apr | Cash Sales | 5000 | 17300 | |
| 18-Apr | Telephone Bill | 800 | 16500 | |
| 20-Apr | Received from Customer | 3500 | 20000 | |
| 25-Apr | Wages Paid | 4000 | 16000 | |
| 30-Apr | Balance c/d (Carried Forward) | 16000 |
Note: “Balance c/d” will become “Balance b/d” (opening balance) for next month.
Taxation & Practical Use
While a single entry system is legally allowed for very small businesses (non-audit cases under Income Tax), it is not sufficient once turnover crosses the statutory audit limit or if you are registered under GST. For GST compliance, double entry or proper books of account are required to generate GSTR-3B, GSTR-1, and annual returns.
Practical Tip: You can maintain this single-entry cash book easily in Microsoft Excel or Google Sheets. Just create the following columns:
Date | Particulars | Receipts | Payments | Balance
Apply a simple running balance formula to the Balance column. This keeps your books neat, searchable, and ready for a basic profit calculation at year-end.
Note: For growing businesses, upgrade to double entry accounting or software like Tally/Zoho/Busy to stay compliant and generate financial statements automatically.
What is Double Entry System?
The double entry system of accounting is the globally accepted method where every transaction affects two accounts: one is debited, and another is credited — keeping the accounting equation always in balance.
Golden Rules of Accounting
Before we learn debit and credit for each account type, here are the three golden rules you must know:
- Personal Account: Debit the Receiver, Credit the Giver (Example: Paid cash to supplier → Supplier A/c Dr, To Cash A/c)
- Real Account: Debit what comes in, Credit what goes out (Example: Purchased furniture → Furniture A/c Dr, To Cash A/c)
- Nominal Account: Debit all expenses & losses, Credit all incomes & gains (Example: Received interest → Bank A/c Dr, To Interest Income A/c)
Rules of Debit and Credit (Easy Version)
Here are the rules of double-entry system with examples in a simple tabular format:
| Account Type | Rule for Debit (Dr) | Rule for Credit (Cr) | Example |
|---|---|---|---|
| Assets / Real Accounts | Debit what comes in (when you acquire an asset) | Credit what goes out (when you give away/sell asset) | Bought furniture: Furniture A/c Dr, To Cash A/c |
| Liabilities | Debit when liability decreases (you repay) | Credit when liability increases (you take a loan) | Paid back loan: Loan A/c Dr, To Cash A/c |
| Capital / Owner’s Equity | Debit when capital is withdrawn (drawings) | Credit when capital is introduced | Introduced cash: Cash A/c Dr, To Capital A/c |
| Incomes / Gains | Debit when income is reversed or reduced | Credit when income is earned | Earned interest: Bank A/c Dr, To Interest Income A/c |
| Expenses / Losses | Debit all expenses & losses | Credit when you cancel or reduce an expense | Rent paid: Rent A/c Dr, To Cash A/c |
Advantages & Limitations of Double Entry
- Gives a complete, scientific record of all transactions
- Enables preparation of trial balance, profit & loss, and balance sheet
- Helps detect errors and prevent fraud
- Accepted by tax authorities, banks, and auditors
- Provides better control for business decision-making
- More complex and time-consuming than single entry
- Requires trained staff or accounting software
- Costlier for very small businesses
Single Entry vs Double Entry – Detailed Comparison
To understand why most businesses eventually switch to double-entry, here is a side-by-side comparison of both systems with detailed explanations:
| Aspect | Single Entry System | Double Entry System |
|---|---|---|
| Recording | Records transactions only on one side (either receipt/payment or one personal account). It is similar to a personal cash diary. | Records every transaction with two aspects — Debit and Credit — ensuring that books remain balanced. |
| Accuracy | Prone to omissions and arithmetical mistakes since no double check is built in. | Mathematically accurate because total debits must equal total credits. |
| Trial Balance | Not possible because accounts are incomplete; there is no way to verify totals. | Preparation of trial balance is always possible, making error detection much easier. |
| Error Detection | Difficult to find mistakes; fraud can go unnoticed. | Errors, omissions, or fraud are easier to spot as books must balance. |
| Financial Statements | Cannot prepare a full profit & loss account or balance sheet; only rough profit estimates are possible. | Enables preparation of full P&L Account and Balance Sheet showing true financial position. |
| Compliance | Not accepted for GST, tax audit, or statutory compliance — only suitable for very small, informal businesses. | Fully accepted by tax authorities, auditors, and banks; necessary for GST returns and audits. |
| Cost | Very cheap — can be maintained manually without an accountant. | Higher cost — may require an accountant or accounting software, but gives accurate and reliable data. |
| Suitability | Suitable for petty shopkeepers, freelancers, or small traders with very few transactions. | Suitable for all businesses — manufacturing, trading, and service — especially when turnover is high. |
Quick Journal Examples
| Date | Particulars | Dr (₹) | Cr (₹) |
|---|---|---|---|
| 01-Apr | Cash A/c Dr To Capital A/c (Being capital introduced) |
50,000 | 50,000 |
| 05-Apr | Purchase A/c Dr To Ram Traders A/c | 20,000 | 20,000 |
| 10-Apr | Rent A/c Dr To Cash/Bank A/c | 5,000 | 5,000 |
Practice: Mr. RaviRaj (Full Double-Entry Cycle)
Solve end-to-end: Journal → Ledger → Trial Balance → Profit & Loss (T) → Balance Sheet (T).
Transactions (April)
| No. | Date | Transaction |
|---|---|---|
| 1 | 01-Apr | Started business with cash ₹1,00,000 |
| 2 | 03-Apr | Deposited ₹50,000 into bank |
| 3 | 05-Apr | Purchased goods on credit from Ram Traders ₹40,000 |
| 4 | 07-Apr | Purchased furniture for cash ₹10,000 |
| 5 | 10-Apr | Cash sales ₹30,000 |
| 6 | 12-Apr | Credit sales to Shyam Enterprises ₹20,000 |
| 7 | 15-Apr | Paid rent by cheque ₹5,000 |
| 8 | 16-Apr | Paid wages in cash ₹3,000 |
| 9 | 17-Apr | Bought stationery for cash ₹2,000 |
| 10 | 18-Apr | Paid electricity bill by cheque ₹1,500 |
| 11 | 19-Apr | Paid telephone bill in cash ₹1,000 |
| 12 | 18-Apr | Received ₹15,000 from Shyam Enterprises |
| 13 | 20-Apr | Paid ₹25,000 to Ram Traders by cheque |
| 14 | 25-Apr | Withdrew ₹5,000 cash for personal use |
Journal / Voucher Entries for April
| Sl. No. | Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 1 | 01-Apr |
Cash A/c Dr To Capital A/c (Being capital introduced) |
1,00,000 | 1,00,000 |
| 2 | 03-Apr | Bank A/c Dr To Cash A/c (Cash deposited) |
50,000 | 50,000 |
| 3 | 05-Apr | Purchases A/c Dr To Ram Traders A/c (Goods purchased on credit) |
40,000 | 40,000 |
| 4 | 07-Apr | Furniture A/c Dr To Cash A/c (Furniture purchased) |
10,000 | 10,000 |
| 5 | 10-Apr | Cash A/c Dr To Sales A/c (Cash sales) |
30,000 | 30,000 |
| 6 | 12-Apr | Shyam Enterprises A/c Dr To Sales A/c (Credit sales) |
20,000 | 20,000 |
| 7 | 15-Apr | Rent A/c Dr To Bank A/c (Rent paid by cheque) |
5,000 | 5,000 |
| 8 | 16-Apr | Wages A/c Dr To Cash A/c (Wages paid) |
3,000 | 3,000 |
| 9 | 17-Apr | Stationery A/c Dr To Cash A/c (Stationery purchased) |
2,000 | 2,000 |
| 10 | 18-Apr | Electricity A/c Dr To Bank A/c (Electricity bill paid) |
1,500 | 1,500 |
| 11 | 19-Apr | Telephone A/c Dr To Cash A/c (Telephone bill paid) |
1,000 | 1,000 |
| 12 | 18-Apr | Bank A/c Dr To Shyam Enterprises A/c (Payment received) |
15,000 | 15,000 |
| 13 | 20-Apr | Ram Traders A/c Dr To Bank A/c (Payment made to supplier) |
25,000 | 25,000 |
| 14 | 25-Apr | Drawings A/c Dr To Cash A/c (Cash withdrawn for personal use) |
5,000 | 5,000 |
Ledger Posting
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 01-Apr | To Capital A/c | 1,00,000 | — | 1,00,000 Dr |
| 03-Apr | By Bank A/c | — | 50,000 | 50,000 Dr |
| 07-Apr | By Furniture A/c | — | 10,000 | 40,000 Dr |
| 10-Apr | To Sales A/c | 30,000 | — | 70,000 Dr |
| 16-Apr | By Wages A/c | — | 3,000 | 67,000 Dr |
| 17-Apr | By Stationery A/c | — | 2,000 | 65,000 Dr |
| 19-Apr | By Telephone A/c | — | 1,000 | 64,000 Dr |
| 25-Apr | By Drawings A/c | — | 5,000 | 59,000 Dr |
| Closing Balance | 59,000 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 03-Apr | To Cash A/c | 50,000 | — | 50,000 Dr |
| 15-Apr | By Rent A/c | — | 5,000 | 45,000 Dr |
| 18-Apr | To Shyam Enterprises A/c | 15,000 | — | 60,000 Dr |
| 18-Apr | By Electricity A/c | — | 1,500 | 58,500 Dr |
| 20-Apr | By Ram Traders A/c | — | 25,000 | 33,500 Dr |
| Closing Balance | 33,500 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 01-Apr | By Cash A/c | — | 1,00,000 | 1,00,000 Cr |
| Closing Balance | 1,00,000 Cr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 25-Apr | To Cash A/c | 5,000 | — | 5,000 Dr |
| Closing Balance | 5,000 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 05-Apr | To Ram Traders A/c | 40,000 | — | 40,000 Dr |
| Closing Balance | 40,000 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 10-Apr | By Cash A/c | — | 30,000 | 30,000 Cr |
| 12-Apr | By Shyam Enterprises A/c | — | 20,000 | 50,000 Cr |
| Closing Balance | 50,000 Cr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 07-Apr | To Cash A/c | 10,000 | — | 10,000 Dr |
| Closing Balance | 10,000 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 12-Apr | To Sales A/c | 20,000 | — | 20,000 Dr |
| 18-Apr | By Bank A/c | — | 15,000 | 5,000 Dr |
| Closing Balance | 5,000 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 05-Apr | By Purchases A/c | — | 40,000 | 40,000 Cr |
| 20-Apr | To Bank A/c | 25,000 | — | 15,000 Cr |
| Closing Balance | 15,000 Cr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 15-Apr | To Bank A/c | 5,000 | — | 5,000 Dr |
| Closing Balance | 5,000 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 16-Apr | To Cash A/c | 3,000 | — | 3,000 Dr |
| Closing Balance | 3,000 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 17-Apr | To Cash A/c | 2,000 | — | 2,000 Dr |
| Closing Balance | 2,000 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 18-Apr | To Bank A/c | 1,500 | — | 1,500 Dr |
| Closing Balance | 1,500 Dr | |||
| Date | Particulars | Debit (₹) | Credit (₹) | Balance |
|---|---|---|---|---|
| 19-Apr | To Cash A/c | 1,000 | — | 1,000 Dr |
| Closing Balance | 1,000 Dr | |||
Trial Balance (as on 30-Apr)
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash A/c | 59,000 | – |
| Bank A/c | 33,500 | – |
| Capital A/c | – | 1,00,000 |
| Furniture A/c | 10,000 | – |
| Purchases A/c | 40,000 | – |
| Sales A/c | – | 50,000 |
| Shyam Enterprises | 5,000 | – |
| Ram Traders | – | 15,000 |
| Rent A/c | 5,000 | – |
| Wages A/c | 3,000 | – |
| Stationery A/c | 2,000 | – |
| Electricity A/c | 1,500 | – |
| Telephone A/c | 1,000 | – |
| Drawings A/c | 5,000 | – |
| Total | 1,65,000 | 1,65,000 |
Profit & Loss Account (for the month ended 30-Apr)
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| To Opening Stock | – | By Sales | 50,000 |
| To Purchases | 40,000 | ||
| To Wages | 3,000 | ||
| To Rent | 5,000 | ||
| To Stationery | 2,000 | ||
| To Electricity | 1,500 | ||
| To Telephone | 1,000 | ||
| To Net Loss transferred to Capital A/c | -2,500 | ||
| Total | 50,000 | ||
Balance Sheet (as on 30-Apr)
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Capital A/c | 1,00,000 | Cash in Hand | 59,000 |
| Less: Drawings | (5,000) | Bank Balance | 33,500 |
| Less: Net Loss | (2,500) | Debtors – Shyam Enterprises | 5,000 |
| Adjusted Capital | 92,500 | Furniture | 10,000 |
| Creditors – Ram Traders | 15,000 | ||
| Total | 1,07,500 | Total | 1,07,500 |
Common Errors in Double Entry
- Error of Omission: Entire transaction is missed out from the books.
- Error of Commission: Transaction is recorded, but posted to the wrong ledger or wrong amount.
- Error of Principle: Wrong nature of account used (e.g., capital expense treated as revenue).
- Compensating Errors: Two or more mistakes cancel each other and do not affect the trial balance.
Note: Use a Suspense Account temporarily when your trial balance does not tally. Once the error is located and rectified, transfer the balance out of Suspense A/c.
📘 Quick Revision FAQs – Single & Double Entry Accounting
What is Double Entry System with Example?
It’s a method where every transaction has equal debit and credit. Example: Bought furniture ₹10,000 → Furniture A/c Dr 10,000, To Cash A/c 10,000.
What are the Golden Rules of Accounting?
Personal: Debit Receiver, Credit Giver.
Real: Debit what comes in, Credit what goes out.
Nominal: Debit expenses & losses, Credit incomes & gains.
Difference between Single Entry and Double Entry System?
Single Entry: Only cash & personal accounts, no trial balance.
Double Entry: Each transaction has debit & credit, enabling Trial Balance, P&L, Balance Sheet.
Is Single Entry Accounting allowed under GST or Audit?
No ✅ — GST compliance and Tax Audit require proper books (double entry or software).
Can I Maintain Single Entry in Excel?
Yes – just create columns for Date, Particulars, Receipts, Payments, Balance, and use a running total formula. Upgrade to software like Tally/Zoho/Busy as your business grows.
Advantages of Double Entry System?
Complete record of all transactions, accurate profit calculation, easier error detection, fraud prevention, and accepted by auditors & banks.
Double Entry Formula?
Assets = Liabilities + Capital (or Total Debits = Total Credits).
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Free Downloads
- PDF: Single vs Double Entry – Notes + Examples
- Excel: Double-Entry Journal + Ledger + Trial Balance template
- Worksheet: Mr. RaviRaj full-cycle (with Answer Key)
Attach your files here or link to Google Drive.