Meaning and Features of Incomplete Records (Single Entry System)

Every business is required, in principle, to record its transactions on the double entry system — every transaction affecting two accounts, so that a Trial Balance can be extracted and the books proved arithmetically correct. In practice, a very large number of small traders, sole proprietors and small partnership firms do not maintain their books this way. They keep only the records they find convenient — usually a cash book and personal accounts of debtors and creditors — and leave out real accounts (assets other than cash/bank) and nominal accounts (expenses, incomes, gains, losses) almost entirely. Books maintained this way are called Incomplete Records, and the loose, unsystematic method behind them is popularly called the Single Entry System.

It is important to understand at the outset that Single Entry is not really a "system" of accounting in the way double entry is. Double entry is a complete, self-balancing method with its own rules (debit and credit for every account). Single Entry has no such fixed rule — it is simply whatever partial, incomplete set of records a trader happens to keep. For this reason accountants often describe it as "a mixture of double entry, single entry, and no entry at all" for different transactions in the same set of books.

Features of Incomplete Records / Single Entry System

• Only personal and cash accounts are maintained fully. Accounts of debtors and creditors (personal accounts) and a cash book are usually kept up to date because a trader needs to know who owes money and who is owed money, and how much cash is on hand.
• Real and nominal accounts are not maintained systematically. Accounts for assets such as furniture, machinery, or stock, and accounts for expenses and incomes, are either not kept at all or kept only informally (a diary, a rough note, a memory-based estimate).
• No Trial Balance can be prepared, because the ledger is incomplete — many accounts simply do not exist to be balanced and listed.