Single Entry Method

SINGLE ENTRY METHOD
Double Entry System
The double-entry system of accounting or bookkeeping means that for every business
transaction, amounts must be recorded in a minimum of two accounts. The double-entry
system also requires that for all transactions, the amounts entered as debits must be equal
to the amounts entered as credits.
Single Entry System
It is a system of record keeping in which transactions are not analyzed and recorded in the
double entry framework. The records maintained are represented only by the so-called
“bare essentials”. Normally, the records include a cash, accounts receivable, accounts
payable, property, plant and equipment, and taxes paid. The major record under the
single entry system is the cashbook.
FORMULA for computing Net Income or Net Loss in Single Entry Method:
Proprietorship or Partnership
Capital, end of the year Xx
Add: Withdrawals Xx
Total Xx
Less: Capital, beginning of year Xx
Additional investments xx Xx
Net Income (Loss) xx
Illustration:
On January 1, the capital of Console Company was P1,700,000 and on December 31, the
capital was P2,400,000. During the year, the owner withdrew merchandise costing
P100,000 and with sales price of P180,000, and paid a P1,000,000 note payable of the
business with interest of 12% for six months with a check drawn on a personal checking
account.
Capital, end of the year 2,400,000

Add: Withdrawals 100,000
Total 2,500,000
Less: Capital, beginning of year 1,700,000
Additional investments ( 1,000,000
principal + 60,000 interest) 1,060,000 2,760,000
Net Income (Loss) (260,000)
CAPITAL
Beg 1,700,000
Withdrawals 100,000 Additional Investment 1,060,000
Net Loss ???

End 2,400,000
Corporation
Retained Earnings, end Xx
Add: Dividends declared or paid Xx
Other items that decrease retained earnings but not Xx
profit or loss
Total Xx
Less: Retained earnings, beginning Xx
Other items that increase retained earnings but not Xx
profit or loss
Net Income (loss) xx
Illustration:
1. During the first year, Exel Company issued 15,000 shares with P100 par value at P150 per
share. At year-end, the entity issued 2,000 shares in payment of current obligations of
P250,000. Dividends of P500,000 were paid during the year. Total liabilities at the end of the
year amounted to P200,000 and total assets at the end of the year equaled P3,000,000.
What is the net income for the first year of operations?
Retained Earnings, end ( 3,000,000 Total Assets – 200,000 300,000

Total Liabilities = 2,800,000 Equity – 2,250,000 shares issued –
250,000 shares issued)
Add: Dividends declared or paid 500,000
Other items that decrease retained earnings but not -
profit or loss
Total 800,000
Less: Retained earnings, beginning -
Other items that increase retained earnings but not -
profit or loss
Net Income (loss) 800,000
ALTERNATIVE SOLUTION:
Capital, end of the year (3,000,000 Total Assets 2,800,000
– 200,000 Total Liabilities)
Add: Withdrawals 500,000
Total 3,300,000
Less: Capital, beginning of year (15,000 shares) 2,250,00
Additional investments (2,000 Shares)
250,00 2,500,000
Net Income (Loss) 800,000
2. Aubrey Company provided the following data at year-end:
2020 2021
Share capital (P100 par value) 5,000,000 5,750,000
Share premium 1,000,000 1,500,000
Retained earnings 3,500,000 4,500,000
During the current year, the entity declared and paid cash dividend of P1,000,000 and
also declared and issued a share dividend. There were no other changes in shares issued
and outstanding during the year. What is the net income for the current year?
Retained Earnings, end 4,500,000

Add: Cash Dividends declared or paid 1,000,000
Share Dividends ( share capital increase – 750,000 1,250,000
plus share premium increase – 500,000)
Total 6,750,000
Less: Retained earnings, beginning 3,500,000
Net Income (loss) 3,250,000
ENTRY for the Share Dividend:

Retained Earnings 1,250,000
Share capital 750,000
Share premium 500,000
Note: The credit to share premium indicates that the declaration is a small share dividend
hence, the fair value of the shares may be used in the declaration of share dividend.
A share dividend representing less than 20% of the outstanding shares is considered small
share dividend.
3. Camadillo Company reported the following changes in the account balances for the
current year, except for retained earnings:
Increase(Decrease)
Cash 800,000
Accounts receivable, net 250,000
Inventory 1,250,000
Investments (500,000)
Accounts payable (400,000)
Bonds payable 900,000
Share capital 1,000,000
Share premium 100,000
In the example, the retained earnings and shareholders’ equity at the beginning and end
of the year cannot be determined. Thus, the procedure is to determine the effect of the
changes in assets and liabilities on net assets whether the change in the asset or liability
increases or decreases the net assets.
Increases in assets and decreases in liabilities increase net assets while increases in
liabilities and decreases in assets decrease net assets.
Effect on Net Assets

Increase Decrease
Increase in cash 800,000
Increase in AR 250,000
Increase in Inventory 1,250,000
Decrease in investments 500,000
Decrease in accounts payable 400,000
Increase in bonds payable 900,000
Total 2,700,000 1,400,000
Net increase in net assets 1,300,000

Add: Dividend 300,000
Total
Less: Increase in share capital 1,000,000
Increase in share premium 100,000 1,100,000
Net income 500,000
Preparation of Financial Statements
The preparation of the income statement involves the computation of individual revenue
and expense balances by reference to the cash receipts and disbursements and the
changes in assets and liabilities.
The formulas used in converting cash basis to accrual basis of accounting are useful
in this case. These formulas involve the computation of (1) Sales, (2) Purchases, (3)
Income other sales, (4) Expenses in general
CONVERSION FROM CASH TO ACCRUAL BASIS:
Cash sales Pxx

Sales on Account
Trade A/R and N/R (end) Pxx
Collection of Trade A/R and N/R xx
Sales Returns, discounts and allowances xx
A/R and N/R written off xx
Trade N/R discounted (N/R directly credited) xx
Total Pxx
Trade A/R and N/R (beg) (xx) xx
ACCRUAL Basis – SALES Pxx
Cash Purchases Pxx
Purchases on Account
Trade A/P and N/P (end) Pxx
Payment of Trade A/P and N/P xx
Purchase returns, discounts and allowances xx
Total Pxx
Trade A/P and N/P (beg) (xx) xx
ACCRUAL Basis – PURCHASES Pxx
INCOME Other than Sales EXPENSES Other than Purchases

Income received – CASH basis Pxx Expenses Paid – CASH basis Pxx
Deferred Income – beginning xx Prepaid Expenses – beginning xx
Accrued income – end xx Accrued Expenses – end xx
Total Pxx Total Pxx
Deferred Income – end (xx) Deferred Expense – end (xx)
Accrued income – beginning (xx) Accrued Expense – beginning (xx)
INCOME – ACCRUAL Basis Pxx EXPENSES – ACCRUAL Basis Pxx
Illustration
Haze Company provided the following information for the current year:
January 1 December 31
Cash 620,000 ?
Accounts Receivable 670,000 900,000
Merchandise Inventory 860,000 780,000
Accounts Payable 530,000 480,000
The sales and cost of goods sold were P7,980,000 and P5,830,000, respectively. All sales and
purchases were on credit. Various expenses of P1,070,000 were paid in cash. There were
no other pertinent transactions.
1. What is the amount of collections from customers?
Sales on Account:
Trade A/R and N/R (end) 900,000 Step 1 Given
Collection of Trade A/R and N/R ??? Step 5 7,750,000
Sales Returns, discounts and allowances -
A/R and N/R written off -
Trade N/R discounted (N/R directly credited) -
Total 8,650,000 Step 4 computed
Trade A/R and N/R (beg) 670,000 Step 2 Given
Sales on Account 7,980,000 Step 3 Given
SOLUTION IN GOOD ACCOUNTING FORM:
Sales on Account 7,980,000
Add: Trade A/R and N/R (beg) 670,000
Total 8,650,000
Less: Trade A/R and N/R (end) 900,000
Collection of Trade A/R and N/R 7,750,000
2. What is the payment of accounts payable?
Step 1; Compute for the Purchases on Account

Beginning inventory 860,000 Step 1
Purchases on accounts 5,750,000 Step 5
Goods available for sale 6,610,000 Step 4
Less: Ending inventory 780,000 Step 2
Cost of Goods sold 5,830,000 Step 3
Step 2: Compute for the payment of accounts payable
Purchases on Account
Trade A/P and N/P (end) 480,000 Step 1
Payment of Trade A/P and N/P 5,800,000 Step 5
Purchase returns, discounts and allowances -
Total 6,280,00 Step 4
Trade A/P and N/P (beg) 530,000 Step 2
Purchases on Accounts 5,750,000 Step 3
SOLUTION IN GOOD ACCOUNTING FORM

Purchases on Accounts 5,750,000
Trade A/P and N/P (beg) 530,000
Total 6,280,00
Trade A/P and N/P (end) (480,000)
Payment of Trade A/P and N/P 5,800,000
3. What is the cash balance on December 31?

Cash, beg. 620,000
Collection from customers 7,750,000
Payment of accounts payable (5,800,000)
Payment of various expenses (1,070,000)
Cash, ending balance 1,500,000

Single Entry Method

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SINGLE ENTRY METHOD

Double Entry System

Single Entry System

Capital, end of the year 2,400,000

Withdrawals 100,000 Additional Investment 1,060,000

Net Loss ???

Retained Earnings, end ( 3,000,000 Total Assets – 200,000 300,000

Retained Earnings, end 4,500,000

ENTRY for the Share Dividend:

Effect on Net Assets

Net increase in net assets 1,300,000

Preparation of Financial Statements

CONVERSION FROM CASH TO ACCRUAL BASIS:

Cash sales Pxx

INCOME Other than Sales EXPENSES Other than Purchases

1. What is the amount of collections from customers?

2. What is the payment of accounts payable?

Step 1; Compute for the Purchases on Account

Step 2: Compute for the payment of accounts payable

SOLUTION IN GOOD ACCOUNTING FORM

3. What is the cash balance on December 31?

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