Single-entry accounting is a method of tracking business assets, liabilities, income, and expenses which records each transaction a single time. Also referred to as single-entry bookkeeping. Compare with double-entry accounting, which logs every transaction so that the assets areliabilities/equity. For example, if a business sells a good under single-entry accounting, the expenses for the good would have been recorded at the time the business purchased it, and the revenue is recorded at the time of sale. To contrast, under a double-entry accounting system, when the business initially purchased the good, they would record an increase in inventory (an asset) along with a decrease in assets if they paid with cash, or an increase in liabilities if they purchased the inventory on credit. When the business sells the good, the business will record an increase in assets in whatever form the customer paid them (e.g. cash or accounts receivable) and a decrease in assets because they sold the inventory. Single-entry accounting may suffice for smaller and simpler businesses but may not provide a larger business with an accurate picture of their financial situation. As the aforesaid example illustrates and among other reasons, single-entry accounting fails to take concepts such as inventory into account. Another reason is that a firm cannot create a balance sheet from single-entry accounting.
[Last updated in April of 2021 by the Wex Definitions Team]
