This system of checks and balances helps catch errors and keeps the financial records reliable. In this article, we’ll discuss single vs. double-entry bookkeeping to help you choose the right approach for recording day-to-day transactions. On top of that, any business that handles anything other than cash transactions needs to use double-entry bookkeeping. For example, if your business buys or sells on credit, then you need to implement a double-entry system.
After you factor in all these transactions, at the end of the given period, you calculate the cash balance you are left with. Single-entry bookkeeping is a simple and straightforward method of bookkeeping in which each transaction is recorded as a single-entry in a journal. This is a cash-based bookkeeping method that tracks incoming and outgoing cash in a journal.
Single-Entry Vs. Double-Entry Bookkeeping: Which Is Best For Your Startup?
You should always remember that each side of the equation must balance out. This is how we arrive at the term “balancing the books.” A small example will help you understand this equation. So this amount is debited to your account and raises the account balance to $4500.
Since this is an expense, you subtract this amount from your cash balance. Let’s assume you have a $5000 cash balance at the beginning of the first week in June. Turn your receipts into data and deductibles with our expense reports that include IRS-accepted receipt images. These are companies that are hoping to grow into large, successful technology, single vs double entry bookkeeping ecommerce and biotech businesses. They all eventually hope to execute and IPO or be acquired by large, publicly traded companies for hundreds of millions of dollars (or more!). Because the double-entry system is more complete and transparent, anyone considering giving your business money will be a lot more likely to do so if you use this system.
