It is possible for a business to operate with the single entry bookkeeping system if the business is new and/or the business transactions are low in volume and uncomplicated.
Single entry bookkeeping is a great, easy way to ease yourself into accounting! And it’s cheap because you do not have to invest in bookkeeping software.
method of bookkeeping is a simple record of income and expenses using a
manual cash book and calculator, or a spreadsheet in a self calculating
programme such as Open Office, Excel or Quattro Pro. Go here for a free excel cash book.
There are no asset, liability or equity accounts as per double entry bookkeeping so single entry bookkeeping cannot be used to produce a balance sheet. However, if your business by nature remains very small and uncomplicated then you need not be concerned by this.
If you are keen on starting with single entry bookkeeping for your budding business then take a look below at the sample of a cash book/spreadsheet. It’s very easy to set one up just like it.
The Date - This is the date of the transaction which you can get off the accounting source documents.
Description - A brief description of the transaction. You can put whatever information you feel necessary, but don’t overdo it!
Reference - You can basically choose whatever reference will help you identify the transaction. Some people use the invoice numbers. The reference can be written somewhere on the transaction document, if it’s not on there already - like an invoice number. This is a good way of cross referencing the transaction between the cash book and the document.
Income/Expenses - Simply insert the value of the transaction into the appropriate column... is it money coming in to the business or money going out of the business? You could change the headings to ‘Money In’ and ‘Money Out’ if you prefer.
Bank - This is a running balance column that changes each time a transaction is entered. Add the income, subtract the expenses. Notice on 01 Apr there is an opening balance. This is the balance taken from the last day in March and brought forward (b/f) to Apr. It can also be called b/d - brought down.
Okay! Now you’ve got the hang of that, let’s discuss the bottom section of the spreadsheet...
Check out our lesson on the cash book format.
This is done to match the cash book total to the bank statement total for the end of April. You just need to go through and tick each cash book item that has a corresponding entry on the bank statement. Or you can put an R for reconciled as the example above shows.
Also included in the reconciliation is the cheque of $125.00 - this was already written in the cash book but as at the end of April the supplier had not yet presented it to their bank so it is ‘added back in’. The deposit made of $54.00 is yet to be taken to the bank by our bookkeeper so this has to be ’taken away’.
Do not include any transactions in
the cash book that are never going to be reflected on the bank
statement. The two should always be in agreement.
If you want to keep a slightly more detailed cash book you can do the following:-
Note: some of the lines in this pdf look thick but when the document is printed they come out fine.
A separate column is made for each sale item and each expense item, and totalled. This is a great way of keeping closer tabs on how much you are receiving or spending for each income or expense type.
Incidentally, these separate columns are what make up the ‘accounts’ of a bookkeeping system i.e. bank account, stationery account, internet account and so on.
With this extended sheet it is wise to double check that the totals going across the sheet add up to the totals going down the sheet thus maintaining the accuracy of your accounts.
The difference between the Income and Expenses is written just below the Income Bank column as the ‘c/f’ figure. Carry on with a bank reconciliation as per previous example.
If at some stage you require a balance sheet you can pass on the single entry bookkeeping records to your accountant.
He/she will also need to know how much your customers owe you and how much you owe your creditors.
Then your accountant will enter your totals into a double entry bookkeeping system and produce a balance sheet.
at some stage you require a balance sheet you can pass on the single
entry bookkeeping records to your accountant.
Now, if you are wondering why you would need a balance sheet here are a few reasons:-
Why? Because a balance sheet shows the financial condition of your business and whether or not it is viable.
Once your business grows and you’re able to process a cashbook with confidence you can move on from single entry bookkeeping. Remove the training wheels and expand into double entry bookkeeping.
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