Business transaction recording system, Single entry system, Double entry system

A business man records the business transactions in two ways. They are

1)     Single entry system:  

               This Method is unscientific an incomplete. Some experts in accountancy revealed that single entry system is not at all a system of accountancy. In this system only one side aspect of the transaction (Either Debit or Credit) is to be recorded instead of two aspects. Hence this system is called “Single entry system”. In this method the accountant maintain only personal account and cash book and also maintain real account and leaves the nominal account. This method is known as “incomplete” double entry system. According to Indian companies act 1956 the single entry system of accounts should not be followed by “Joint Stock Companies”.

2)     Double Entry System:  

               The double entry system was invented by a Trader called “LUCI PACIOLO” in “Italy” he wrote about this system in his first book “DE COMPUTISET SCRIPTURIS” In the year “1434”. According to him every transaction takes place between either two persons or two firms/enterprises. When such a transaction takes place one person receives benefit and the other person gives benefit. These two benefits are inseparable. Hence, we can not think of one transaction leaving the other. If one person is “receiving” the benefit, it indicates that some other person is giving that benefit. In accountancy the receiving benefit in called “Debit” aspect and giving benefit is called “Credit” aspect. This, the procedure of recording both the receiving and giving aspects related to business transaction is called “Double entry system”.