Understanding When to Use Single vs. Double Entry Bookkeeping
The bookkeeping system you utilize for your company will help streamline your financial tracking methods. You must pick between single and double entry bookkeeping methods by determining which one would best support your Missouri company size and configuration. Here’s what you need to know while deciding between these two options.
With single entry bookkeeping, you keep a running tally of your income, expenses and other transactions in a single ledger. You record and balance the information in the same way you would using a register for your personal bank account. Each line represents just one entry, hence the name, to keep your recordkeeping technique as simple as possible. Although this system works well in the earliest stages of small business operations, it is quickly made obsolete as growth demands a better system. If you just keep your books balanced for tax purposes, however, the single entry system may be the way to go.
The double entry bookkeeping system utilizes dual columns that represent debit and credit transactions. When you make a payment from one account, you subtract it from your asset account and add it to the equities column. This method allows you to quickly and easily balance your books without managing several different ledgers. With the double entry approach, you can accurately calculate your company’s assets by adding up the net worth and liabilities columns, which helps you gauge the financial health of your small business. This accounting method may feel a bit overwhelming at first, but once you see how well it balances, you will likely convert over for good.
Choosing Between Your Bookkeeping Entry Options
You may need to try out each bookkeeping method to find the best one for your business operations. If you need help determining the best bookkeeping entry option to use for your small business, contact your accounting expert at accountRely in St. Louis, MO for a consultation appointment today.