Portfolio Management – Meaning and Important Concepts
It is essential for individuals to invest wisely for the rainy days and to make their future secure. What is a Portfolio ? A portfolio refers to a collection of investment tools such as stocks, shares, mutual funds, bonds, cash and so on depending on the investor’s income, budget and convenient time frame. Following are […]
The Impact of Tariffs on the Energy Sector
The American energy sector has really taken off in the past few years. The discovery of “fracking” or hydraulic fracturing has completely changed the dynamics of the oil and gas industry. The end result has been a historic boom in the oil and gas industry. For the first time in many decades, America has become […]
High Yield Bonds
The international bond market is a large and diverse market. There are various categories of bonds that are issued in these markets globally. However, they can be categorized based on their risk-return profile. The safest bonds are issued by sovereign entities. They are considered to be the safest since governments have the power to tax […]
How to Identify an Overvalued Market?
All stock market investors know that markets go through periods of euphoria and panic. During periods of euphoria, investors keep on buying shares in the hope of a higher payoff. In technical terms, this is the situation wherein the entire market becomes overvalued. The opposite of this also happens when fear grips the market, everybody […]
Sources of Revenue: Broadcasting Rights
The consistent generation of revenue is important for the success of any sports league. If the organizers of any of these leagues have to spend a large amount of time and resources to collect revenues, then they will not be able to focus on organizing the game. This is where the broadcasting rights come into […]
Single entry accounting systems record only one side of every transaction. This happens because they use one entry to record every transaction. Therefore single entry system does not use nominal and real accounts. The emphasis is on cash and accounts receivable.
Single entry accounting system can be described as a system that businesses use to get by rather than something that companies may find desirable.
Single entry system is used by small firms that have just started business. Such firms do not have the resources that are required to put up a full-fledged accounting system in place. Hence they begin with a single entry accounting system. However as and when their business grows most firms are compelled to adopt the double entry system. This is because the single entry system is highly inefficient and can be used only by sole proprietors when the scale of business is very small and the transactions to be undertaken are not very complicated.
The biggest problem with single entry bookkeeping system is that of incomplete records. Single entry system records only transactions that the firm is undertaking with external parties. There are numerous transactions within the firm that are of vital importance and need a place in the financial statements. However, the single entry system ignores these needs and gives incomplete information to the management.
Single entry accounting system does not have provisions for reconciliation of accounts. This means that the system does not have inbuilt error detection. Therefore, if a clerk is doing the task of making entries in the book, the system may be prone to clerical errors. This could lead to management having insufficient information or no information when they have to make decisions.
Single entry accounting system is highly prone to frauds and embezzlement. There is only one book of account rather than an elaborate accounting system. Hence, the internal checks are few. In fact they are non-existent. The person making the accounts could single handedly manipulate the books of accounts and misappropriate the resources of the firm.
To counter this problem, Luca Pacioli and other merchants of Venice created the double entry accounting system. This system proved to be very effective and useful and soon became the gold standard for the industry.
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An Overview of Contracts and Why They are Important to Business and Society
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