SYSTEMS OF ACCOUNTING

FOLLOWING ARE THE SYSTEM OF ACCOUNTING

Cash System of Accounting.

Mercantile or Accrual System of Accounting. Mixed System of Accounting.

Cash System of Accounting

Under this system, only actual cash receipts and cash payments are recorded. No credit transaction is made for a payment or receipt until cash is actually received or paid. This system is usually adopted by the Government Organizations and Financial Institutions.

Mercantile or Accrual System of Accounting

Under this system, all business transactions are recorded in the books of accounts for a particular period inclusive of cash receipts and cash payments or any amount having become due for payment or receipt.

Mixed System of Accounting

This system is applicable only where there is a concern adopting combination of Cash System and Mercantile System. Under Mixed System of Accounting, some records are made under cash system whereas others are recorded under mercantile system.

Accounting records prepared under of the following system

Single Entry System
Under this system, all transactions relating to a personal aspect are recorded in the books of accounts but leaves all impersonal transactions.

Double Entry System

Under this system, every transaction of the business has two aspects. The transaction should be recorded in the books of accounts according to the two aspects.

DIFFERENCES
SINGLE ENTRY SYSTEM

DOUBLE ENTRY SYSTEM

Incomplete system of recording financial transactions. It is not based on the concept of duality.

A complete system of recording and reporting financial transactions. It is based on the concept of duality. Maintains all personal, real and nominal accounts. Suitable for a large business.

Maintains only personal accounts of debtors and creditors and cash book.
Suitable to a small business where only limited number of transactions are performed