Expert: Arthur Naman - 8/15/2008

Question
If I am going to use single entry accounting rather than double in my small business (service oriented) do I have to set up asset and liability accounts in my chart of accounts? If not, then how do I track things like business loans or assets like office furniture?

Answer
A single entry accounting system is simply a means to track cash receipts and disbursements. Thus if an amount is paid for the cost of an asset, the single entry system will track that payment. Similarly for liabilities, a single entry system will track payments of liabilities.

There is no means to track the balances implicit in fixed assets and liabilities.

At the end of the accounting period, normally a year, there is no means to track balances of an account into the following year. Of course a single entry system combined with a separate spreadsheet used to track fixed asset balances or liability balances might work for a small business.

Typically this is a means to track or categorize the activity of a single checking account.

Having said this, I have not worked with Quicken, for example, which is a single-entry system so I cannot comments on what that particular product will or will not do. Similarly for any other single entry system.

How come you are reluctant to use a double-entry system? It's not really so difficult.