Single Entry System Flashcards
Single Entry System
A system of record keeping in which transactions are not analyzed and recorded in the double entry framework.
How to compute for net income or net loss using the single entry method?
Compare capital or retained earnings at the beginning of the year and at the end of the same year
Cash Basis Accounting
A system that recognizes revenue when cash is received and expenses when cash is paid.
Accrual Basis Accounting
An accounting system that recognizes revenue when earned rather than when cash is received and recognizes expenses as it is incurred rather than when cash is paid.
Comparison of Cash Basis & Accrual Basis: SALES
CASH BASIS:
- Cash Sales
- Collection of trade accounts receivable
- Collection of trade notes receivable
ACCRUAL BASIS:
- Cash sales
- Credit sales (sale on account)
Comparison of Cash Basis & Accrual Basis: INCOME OTHER THAN SALES
CASH BASIS:
- Includes only those COLLECTED during the period
ACCRUAL BASIS:
- Includes those items EARNED during the period
Comparison of Cash Basis & Accrual Basis: PURCHASES
CASH BASIS:
- Cash purchase
- Payment of trade accounts payable
- Payment of trade notes payable
- Payment in advance to suppliers
ACCRUAL BASIS:
- Cash purchases
- Purchase on account
Comparison of Cash Basis & Accrual Basis: EXPENSES, in general
CASH BASIS:
- Include only those expenses that are paid
ACCRUAL BASIS:
- Include those items that are incurred regardless of when paid
Comparison of Cash Basis & Accrual Basis: DEPRECIATION
CASH BASIS:
- Depreciation is typically provided except when the cost of equipment was treated as expense
ACCRUAL BASIS:
- Depreciation is typically provided
Comparison of Cash Basis & Accrual Basis: BAD DEBTS
CASH BASIS:
- No bad debts expense is recognized
(Since cash basis does not recognize receivables. Although some problem may give an indication that the accounts written off were charged to bad debts expense.)
ACCRUAL BASIS:
- Doubtful accounts are treated as bad debts.
What is the T-Account for AR/NR/Adv. from customers
See notes
What is the T-Account for AP/NP/Advances to Supplier
See notes
What is the T-Account for Merchandise Inventory
See notes
How to compute for cost of sales?
Use T-Account
or
Merchandise inventory, beginning XX
Add: Net purchases XX
TGAS XX
Less: Merch. Inventory, end XX
COST OF SALES XX
How to compute for net purchases?
Gross purchases XX
Add: Freight-in XX
Less: Purchase discount XX
Purchase returns & allowances XX
NET PURCHASES XX
