Double Entry Bookkeeping
Are you setting up a new business? One of the first things you need to think about is which booking system you are going to use to record your financial transactions: double-entry bookkeeping vs. single entry or bookkeeping.
Definitely, any business deals with many transactions on a regular basis, including purchases, receipts, sales, and payments.
If you are not keeping a robust record of those transactions, then you will probably be losing essential financial data that can be used to maximize your business efficiency and profitability.
We will break down to you the difference between single and double-entry bookkeeping.
Let’s delve in!
Double Entry Bookkeeping
It is an accounting system that requires financial transactions to be recorded in two accounts: debits and credits. When posting a transaction, you need to enter the amount as debit to be equal to the amount added as credit.
Most businesses use a double-entry bookkeeping system because it helps business owners to detect any accounting errors, preventing them from taking wrong decisions. Don't use plagiarised sources.Get your custom essay just from $11/page
3 Benefits of Using Double Entry Bookkeeping
Error Detection: You can quickly identify and fix any erroneous data entered, making sure your debits are balanced with your credits.
Quickly Identify Profit or Loss: Because revenue and expenses are visible, you can easily identify your profit or loss margin.
- Accurate Financial Statements: Because all recorded transactions are correct, the double-entry booking will help you prepare accurate financial statements.
Single Entry Bookkeeping
In contrary to double-entry bookkeeping, single-entry bookkeeping enables you to make only one entry for each transaction. All entries are divided into negative or positive, similar to your check register.
This accounting system is most used by small businesses that don’t have complicated financial transactions, as it only keeps records of cash inflow and outflow, instead of tracking accounts like inventory, playable, receivable, etc.
Why Single Entry Bookkeeping is Used
It is a simple and straightforward accounting system that can be used by business owners without advanced accounting skills and expertise. You will need a simple spreadsheet where you can add your financial data.
What to Do Next?
Set your mind at peace and let a professional financial and account company take over your bookkeeping duties. At ZADD Numbers, we provide top-notch double-entry bookkeeping systems that help you get in-depth insights into your financial performance to run your business efficiently.