Bookkeeping may be classified into two systems, namely, (1) the single entry and (2) double entry.
A. SINGLE ENTRY SYSTEM of bookkeeping is basically a type of “net worth” method of arriving at net income. It records only the debit or credit of each transaction, or an account with the debtor or creditor and a simple record of cash receipts and disbursements.
The single entry is often used by comparatively simple ventures such as small retail or commission merchants, professional firms, estates and trusts. In many cases, the only record of income and deductions consists of entries on the stubs of their checkbooks. Some taxpayers maintain an income tax folder in which they place documents to support their income tax deductions.
B. DOUBLE ENTRY SYSTEM of bookkeeping, accounting recognizes the two-fold effect of every recorded event, the debit and the credit or the object of the event and the equitable interest in that object. Every recorded event affecting one side must necessarily affect the other side.
This can be presented in an equation:
Assets = Liabilities + Capital
Reference: RAMO 1-2000
