Samantha Speakes - 08/20/2024

Single-entry and double entry accounting (or single-entry and double-entry bookkeeping) are both methods of record keeping for a companies financial transaction data or books. Single-entry records each transaction only one time, while double-entry records each transaction twice, once as a debit and once as a credit. The most commonly used form of accounting is double-entry accounting, though there are instances where single-entry is the preferred choice.  Let's walk through the key differences between the two types and benefits and downsides to both. 

Single-Entry Accounting

Single-entry accounting (single-entry bookkeeping) is a method of tracking a companies financial transaction data by recording each transaction one time single time. It lists income and expenses in a single row, with positive values for income and negative values for expenses. 

What are the benefits with single entry accounting?

The biggest advantage for single-entry accounting is its simplicity and ease of use for those just starting their businesses. You can simply setup a single-entry journal in a basic excel spreadsheet and get rolling.  

What are the downsides to single entry accounting?

The two biggest disadvantage to single-entry accounting is its inability to support accrual accounting. Because single-entry accounting only records inflow and outflow cash transactions, it only supports cash basis accounting. If you want to learn more about cash verse accrual accounting, read more here. While single-entry accounting is easy to setup and track, it won't work for your business for the long haul, the simplicity of single entry accounting becomes its major disadvantage very quickly, as a business grows in need of complexity.

Double-Entry Accounting

Double-entry accounting (or double-entry bookkeeping) records each of a companies financial transactions twice, as corresponding debits and credits. Every entry to an account requires a corresponding  opposite entry  to a different account. The total of all the different debit and credit entries must balance out. Double-entry accounting tracks not only cash, but the value of all of a company's assets. 

What are the benefits to double-entry accounting?

There are several advantages to double-entry accounting that set it apart from single-entry accounting. There is a higher level of accuracy with double-entry, as well as more transparency and it a more efficient system for record keeping. Double- entry accounting affords a business owner deeper and more accurate, as well as more easily obtained, financial records and reporting. This allows the business owner to make more effective planning decisions for their business, short and long term. 

What are the downsides to double-entry accounting?

For a small cash only business, that doesn't have a need for in depth reporting, double-entry accounting can have a few disadvantages. It is a more complex method of accounting and therefore takes more time and has a higher cost associate with it. 

So, What Should Your Business Use, Single-Entry or Double-Entry Accounting?

If you've read through the advantages and disadvantages above and are still unsure which method is right for your business, we are here to help!