System of Book Keeping
There are two systems of farm accountancy.
a) Double Entry system
b) Single Entry system
a) Double Entry System: It is a method of recording each transactions in the books of accounts in its two fold aspects1 i.e. two entries are made for each transaction in the same set of books, one being a debit entry and other a credit entry.
Every business transaction involves two parties one, for receiving the goods or services and other for giving them. Every transaction, therefore, is entered at two places, for credit and for debit. For example
i) Sale of Wheat for Rs. 2400/-
Two accounts involved will be cash account and wheat account. The cash account will be receiving account hence the amount will be written on the debit side. The wheat account will be giving account, and hence the amount will be written on the credit side of it.
ii) Receipt of Money from Mr. Ram RS. 2500/-
Here Rs.2500/ have again been received in the cash account. The cash account is therefore debtor for the amount received. Mr. Ram has paid the amount and therefore Mr. Ram’s account will be the creditor. Cash account will be debited and Mr. Ram’s account will be credited.
b) Single Entry System: This is the system which ignores the double effect of transactions. Only personal account of debtors and creditors are kept and the impersonal accounts are ignored completely.
Difference between Double & Single Entry system
Double Entry system
Single Entry System
Double Entry system is perfect in its arrangement and mathematically accurate.
Single Entry system is faulty incomplete & unscientific
Record of both personal and impersonal accounts are kept
Only personal accounts are kept
Trial and balance account is possible under double entry
It can not possible
It is perfect, accurate and result are more reliable
It is imperfect, less accurate and unliable.