Double-Entry vs single-entry Bookkeeping: the best option for small businesses?

Consider why single-entry bookkeeping is important, especially if you operate a small business. It will lead to clear transaction tracking, which could lead to success.

What is double-entry bookkeeping?

It enables a company to track all of its transactions and evaluate how well it is doing in terms of profitability, cash balances, and business development. It also covers all of the ongoing reporting and filing requirements that businesses have — VAT returns, annual accounts, tax returns, and so on.

single-entry bookkeeping

How does it work?

The fundamentals of double-entry bookkeeping are straightforward: each transaction will contain two equal and opposing parts. For example, if you sell goods, your cash balance will increase while your stock levels would decrease.

The entries produced by double-entry bookkeeping are sometimes referred to as debits and credits. These are the two opposing sides of any accounting transaction.

Accounting records for a business, whether basic or complex, will be an accumulation of these double entries. These entries can then be summarised in a general ledger, which provides the total of all entries, broken down by type.

Here is how debits and credits operate in the double-entry bookkeeping system:


  • Add to an asset account or decrease a debt or equity account (such as owner’s equity)
  • Increase an expense account
  • Reduce revenue
  • Are always recorded on the left-hand side of a ledger


  • Increase or decrease a liability or equity account
  • Reduce an expense account
  • Increase your revenue
  • Are always recorded on the right side

When to use double-entry bookkeeping

Simply put, all businesses will be required to use double-entry bookkeeping. It is the only method to assure that financial information is complete, accurate and will support all of the ongoing reporting duties that a business may have.

Some business owners handle all of their double-entry accounting. However, in most situations, bookkeepers or accountants are engaged to assist set up and maintain appropriate systems to meet bookkeeping requirements.

What is single-entry bookkeeping?

Single-entry bookkeeping is a basic technique of bookkeeping in which each transaction is recorded in a journal as a single entry. This is a cash-based bookkeeping approach that keeps a journal of incoming and outgoing cash.

How does it work?

In single-entry accounting, you keep a cash book to record your income and expenses. Begin with your current cash balance for a set period, then add your income and remove your costs. After accounting for all of these transactions at the end of the specified period, you can calculate the cash balance left.

A standard cash book will have the following information:

  • The date of the transaction
  • A quick description of the transaction
  • The transaction’s value – might be incoming (debit) or outgoing (credit)
  • A Balance – total of how much money you have on hand

The main benefit of a single entry system is its simplicity. It needs a small number of entries and a basic understanding of accounting principles. This makes it simple to use for non-accountants. Furthermore, it can be used to calculate the profits generated by a business in a short period of time.

When to use single-entry bookkeeping

This type of bookkeeping is not appropriate for large, complex businesses. It cannot track inventory, accounts payable or accounts receivable. Single-entry accounting can be used to determine net income, but it cannot be used to create a balance sheet or monitor asset and liability accounts. Transactions are recorded as a single entry rather than  debit and credit to a series of books, as in double-entry bookkeeping.

Furthermore, startups and small businesses typically lack a strong financial record. This makes a single-entry system more appealing because there are fewer transactions to document. A startup or small firm may start with single-entry bookkeeping and then transition to double-entry bookkeeping as the business expands.

Leave a Comment

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll to Top