A business owner might maintain its financial transaction either based on a single-entry system or double entry system of accounting. Single entry system is much less time consuming and also much less tiresome while double entry system needs a great deal of effort and time and that is why it is often seen that an ordinary person without accounting background usually go for single entry system.
Meaning of Single-entry System
The single-entry system is the earliest method of maintaining financial documents in the bookkeeping service in Johor Bahru. An entry is created each financial transaction, while the contrary entry is not made as the transactions are input only done one time. It usually tracks the transactions pertaining to movement in the cash.
This method of maintaining documents is mainly made use of by sole proprietorship as well as partnerships. This system does not need high competence or expertise to go into transactions. Trial balance, Balance Sheet as well as income statement are not created under this method. In absence of the income statement, it is rather difficult to comprehend the profit or loss of the business.
Settlement of accounts is difficult due to some disadvantages such as prejudiced input. For this reason, the potential of errors as well as scams is at an incredibly high level. That is why it does not abide by Financial Reporting Standard (FRS). Likewise, accounting documents maintained under this system are not optimal for tax function.
Meaning of Double Entry System
Double Entry System is the proven method of keeping financial documents, developed in 1494, by Luca Pacioli. This system is based upon the idea of duality; each transaction has a double element. Every transaction influences 2 accounts at the exact same time, where one account is credited while the various other is debited.
As an example, Thomas has sold items of RM2,700 in cash to Mary. He has delivered the items, and also the cash is received from Mary. As you can see, the products are sold in return of the cash. Hence, this system documents both elements of a transaction, the reduction in inventory leads to the increase in cash balances.
As a result of two-fold effect, the system has precision, efficiency as well as satisfies the Financial Reporting Standard (FRS). A n all-rounded treatment is complied when inputting the transactions. The treatment starts with the original hard copies, complied with by the ledger, journal (Also see Different Types of Special Journals and Subsidiary Ledgers), trial balance and the income statements as well as Balance Sheet are prepared.
A business owner with little accounting expertise can maintain documents according to the Single entry system. Nonetheless, the double entry system has actually established as a result of some disadvantages in the Single entry system.
You might connect to any accounting firm in Johor Bahru to assist you in maintaining these tedious paperwork.