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INTRODUCTIONA single Entry System is a process of keeping and maintaining the account statement similar
to chequebook record and single line accounting entry is done in the journal (daybook) for
each transactions. All transaction is described as negative or positive introduction. A single
entry system is not in reality any organization. It is just a try to maintain book of transaction
that are happen in business concern by an individual who do not have knowledge of
accountancy. It is just an unfinished record which a small dealer is making who cannot open
an account writer for the similar.
Single entry system is difficult to define because, as a matter of fact there is exist no system
like single entry system of book keeping. Generally, it's a defective double entry system of
book keeping. Some system that comes short of complete double entry method is called
single entry system of book keeping. Usually, a single entry system is used by sole-
proprietorship.
A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type
of business entity that is owned and run by one individual and in which there is no legal
distinction between the owner and the business.
The owner receives all profits (subject to taxation specific to the business) and has unlimited
responsibility for all losses and debts. Every asset of the business is owned by the proprietor
and all debts of the business are the proprietor's. It is a "sole" proprietorship in contrast
with partnership.
i. There are many disadvanteges of keeping incomplete records such as
unscientific and unsystematic. The single entry system is unsystematic and
unscientific system of recording financial transactions. It does not have any set of
fixed rules and principals for recording and reporting the financial transactions.
Besides, it can cause of frauds and error. Since the single entry system of book-
keeping is incomplete, unscientific and unsystematic, it will not help us in
checking arithmetical accuracy of the books of accounts. Therefore, there is
always a possibility of committing frauds and errors in the books of accounts.
ii. Five accounting concepts that applicable with Zaki’s business are consistency,
dual entry system, matching, going concern, and periodicity. Consistency
means once Zaki adopts an accounting principle or method, he should continue to
use it until a demonstrably better principle or method comes along. Not following
the consistency principle means that his business could continually jump between
different accounting treatments of its transactions that makes its long-term
financial results extremely difficult to discern. Next, the applicable concept in
Zaki’s business is dual entry concept. Dual aspect is the foundation or basic
principle of accounting. It provides the very basis of recording the business
transaction in the accounts books. This concepts assume that each transactions
has a dual effect. The recording of transactions are involving of debit and credit
side in the the books of accounts. Besides, the other concept is periodicity.
Periodicity requires all the transactions are recorded in the books of accounts on
the assumption that profits on these transactions are to be ascertained for a
specified period of time. Thus, Zaki needs to prepare a statement of
comprehensive income and statement of financial position at regular time.
However, Zaki also needs to apply going concern concept. Going concern
concept is we assume that the business will continue to carry on its activities for
an indefinite period of time. Simply stated, it means that every business entity has
continuity of life. Thus, it will not be dissolved in the near future. This is an
important assumption of accounting, as it provides a basis for showing the value
of assets in the balance sheet. For example, a company purchases a plant and
machinery of RM 100, 000 and its life span is 10 years. According to this concept
every year some amount will be shown as expenses and the balance amount as
an asset. Thus, if an amount is spent on an item which will be used in business
for many years, it will not be proper to charge the amount from the revenues of
the year in which the item is acquired. Lastly, the applicable concept by Zaki’s
business is matching concept. Matching is the revenue and the expenses
incurred to earn the revenues must belong to the same accounting period. So
once the revenue is realised, the next step is to allocate it to the relevant
accounting period.
iii. The other method of depreciation of non-current asset that can be used by Zaki’s
business is reducing balance method. The reducing balance method is the
depreciation is charged at a fixed rate like straight line method (also known as
fixed installment method) but the rate percent is not calculated on cost of asset as
is done under fixed installment method. It is calculated on the book value of asset.
The book value of an asset is obtained by deducting depreciation from its cost.
The book value of asset gradually reduces on account of charging depreciation.
Since the depreciation rate per cent is applied on reducing balance of asset.
The differentiation between straight line method and reducing balance
method are :-
Straight Line Method Reducing Balance Method
The rate and amount of depreciation
remain the same each year.
The rate remains the same, but the
amount of depreciation diminishes
gradually.
Depreciation rate per cent is
calculated on cost of assets each
year
Depreciation rate per cent is
calculated on book value of asset.
The older the asset the larger the cost
of its repair but the amount of
depreciation remain the same each
year. Hence, the total of depreciation
and repairs increases every year.
This reduces annual profit gradually.
The amount of depreciation
decreases gradually, while the cost of
repairs increases. So, the total of
depreciation and repairs remain more
or less the same each year. Hence, it
causes little or no change in annual
profit or loss.
The differences between Straight Line Method and Sum of The Digits Method are :
Straight Line Method Sum of The Digits Method
The rate and amount of depreciation
remain the same each year
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