In the world of finance and business, your accounting is an important role. Within bookkeeping, there are two ways: single-entry bookkeeping or double-entry bookkeeping.
Although both methods serve the same purpose of having your accounts in order, they are quite different. In this article, we take a closer look at the difference between these two methods.
1️⃣ single-entry bookkeeping
Single-entry bookkeeping, also known as simplified bookkeeping, is a simple method of keeping your accounts.
The principle behind simple accounting is that each transaction (a purchase or sales invoice, for example) is entered, but not linked to the financial transaction. So while you are going to stop all purchases and sales in your accounts, the bank statements are not an essential part of your accounting. This system is especially popular with small companies and freelancers because of its simplicity.
In single-entry bookkeeping, only income and expenses are registered, resulting in simple, uncluttered accounting. This method provides basic insight into a company’s financial health, but it can fall short of providing detailed analysis needed for larger organisations.
Consider, for example, the number of days customers are paying late. You can obviously monitor this through Dexxter, but if you want to apply large-scale analysis to it, you need to go to a full-fledged double-entry accounting system.
Did you know.
Dexxter ‘s accounting platform is specially made for single accounts of Belgian sole proprietors!
2️⃣double-entry bookkeeping
Double-entry bookkeeping on the other hand, is a more advanced method used by larger companies. Double-entry bookkeeping involves processing financial transactions as well to achieve double-checking.
The first stream of documents to enter the accounts is still purchases and sales (just as in single-entry accounting). The second stream, which makes us speak of double-entry bookkeeping, is the financial transactions. For example, bank statements are also entered to check all payments.
The main difference with single-entry bookkeeping is that double-entry bookkeeping includes all elements, both the documents and the related financial transactions. This will give you as a company a more accurate understanding of your financial position.
Tip:
Dexxter offers free webinars and online courses so you are always up-to date with your accounting knowledge!
The main differences ⚖️
- Complexity: Single-entry bookkeeping is simpler and easier to understand than double-entry bookkeeping, which is more complex due to the need to record transactions in two different ways.
- Accuracy: Double-entry bookkeeping provides a more accurate picture of a company’s financial position as financial transactions are also included. While single accounting only provides a summary of income and expenses. As a small company, double-entry bookkeeping can therefore feel heavy and complex.
- Applicability: Single-entry accounting is suitable for small companies with limited transaction volumes, while double-entry accounting is better suited (and usually required) for larger organisations with more complex activities.
In summary, single-entry bookkeeping offers a simple way to keep track of your accounts, quickly and efficiently. While double-entry bookkeeping is a more advanced approach, offering a more accurate understanding of your company, but can also feel heavy and complex.
Selecting the right accounting method depends on the size, complexity and needs of the company. Whatever is the best choice for your company, it is essential to keep good accounting records.
