Financial Control and Single Entry System

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Published: 17th February 2010
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A greater control over the debts owed to the company and by the company is of great importance if one wants to have a smooth operation going on in the business. Bad debts can definitely cripple a small scale business owner. Lack of grip over unpaid invoices can result in serious disruptions and disturbances in a business. Suppliers might stop their supplies and may even attempt to charge recovery costs. Sometimes, they may do a relentless chase for the debts, thus taking up valuable time of both the parties. So, while single entry bookkeeping is deemed a viable option, anyone who adopts a self employed approach of bookkeeping procedures should also maintain a supplementary system to have a good control over the assets and liabilities. Bookkeeping soft wares also can deliver appropriate solutions by facilitating additional financial control over money matters.

Essentially, most of the small businesses make lists of income received and lists of expenses incurred. Making use of single entry bookkeeping necessitates virtually zero accounting and bookkeeping knowledge. While recording the financial transactions in these two lists i.e., income and expenditure, a slight variation in details can have significant effects on the accuracy and quality of records produced. When entering the details in the sales invoices or income received notes in order to get the total sales turnover, a little bit of analysis can save your time and can aid in producing a sophisticated result. For instance, the sales figures can be listed in one column and analyzed. The additional columns could be for different product lines or sales pertaining to different sales channels and sources. Or perhaps, it could be used to segregate interest received from business sales income. Single entry bookkeeping takes care of making a list of all the purchase invoices of various goods and services produced and delivered.

After having produced the exhaustive list of sales and expenses, one goes on to produce the income and expenditure account. Make entries of the totals in the single entry bookkeeping documents on a separate sheet. The sales income should be at the top of the list of expenses featured under each purchase expenditure class. Take out the total expenditure from the total sales income and the result happens to be the net taxable profit. Bookkeeping software attempts to automate this whole process. In the preparation of financial accounts by the owner itself, there is bound to be some advantages and disadvantages. The main advantage happens to be the aspect of ease and simplicity with which various accounts can be generated.

And, one of the main disadvantages of single entry bookkeeping system is the lack of apt financial control arising due to limited number of detailed records pertaining to asset and liability accounts. As these types of smaller businesses do not require a trial balance and balance sheet, making use of a self employed bookkeeping system that records the cash and bank transactions is not unavoidable. But, it is highly recommended if one wants to exercise some additional financial control.
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