Bookkeeping in India is mainly done through two methods: the single-entry system and the double-entry system. Single Entry bookkeeping is easy and appropriate for small businesses, and each transaction is written once. Used extensively by large businesses, double-entry bookkeeping ensures accuracy by maintaining balanced financial records by recording each transaction twice, once as a credit and once as a credit on loan. 

Two Types of Book keeping

  • Single Entry System
  • Double-Entry System
Single Entry System 

 This method requires one entry in the journal for every financial transaction. It is appropriate for enterprises that have fewer transactions and require the documentation of only one of each transaction’s sides. 

 

Example – Let’s look at this example to understand more: – 

Date Description Income Expense Balance Explanation 
01/06/2021 Balance b/d Rs. 50,000 Rs. 30,000 Rs.20,000 The initial balance for the period was Rs. 20,000 against Rs. 50,000 Income, Rs. 30,000 from the previous period. 
05/06/2021 Wages paid  Rs. 5,000 Rs. 15,000 Rs. 5,000 was paid for wages, leaving a balance of Rs. 15,000 
10/06/2021 Electricity bill paid  Rs. 5,000 Rs. 10,000 Rs. 5,000 was paid for the electricity bill, leaving Rs. 10,000  
11/06/2021 Stock Purchase  Rs. 9,000 Rs. 1,000 Rs. 9,000 and purchased stock, leaving Rs. 1,000  
25/06/2021 Sales Rs. 30,000  Rs. 31,000 Rs. 30,000 from the sale, bringing the balance to Rs. 31,000 
28/06/2021 Bank Deposit Rs. 15,000  Rs. 46,000 Rs. 15,000 was deposited, increasing the balance to Rs. 46,000  
Double-Entry System

This method involves the recording of each transaction as debits and credits of two distinct accounts. It offers a more precise reflection of financial transactions and helps maintain the accounting equation as Assets = Liabilities + Equity. 

 

Example – Let’s look at this example to understand more: – 

Sl. No. Date Particulars Debit (Dr) Credit (Cr) Explanations 
1. 1/7/2021 

Salary 

Cash A/c 

(Being salaries paid) 

20000 20000 

Salary: Debited Rs. 20,000 as salaries are an expense. 

Cash A/c: Credited Rs. 20,000 as cash is paid out, decreasing the cash balance. 

2. 5/7/2021 

Electricity Bill 

Cash A/c 

(Being electricity bill paid) 

1000 1000 

Electricity Bill: An expense account, which is debited because expenses increase on the debit side. 

Cash A/c: An asset account, which is credited because cash is decreasing. 

Narration: “Being electricity bill paid” explains the transaction. 

3. 8/7/2021 

Vehicle 

Bank A/c 

(Being vehicle purchased) 

50000 50000 

Vehicle: An asset account, which is debited because assets increase on the debit side. 

Bank A/c: An asset account, which is credited because cash is paid out from the bank, decreasing the bank balance. 

Narration: “Being vehicle purchased” explains the transaction 

Methods of Book-keeping 

Bookkeeping is the core element of the process of keeping financial records. There are two primary methods of bookkeeping: manual and automated. Both the techniques are featured in the different processes and each has its own good side. Here is the different method with examples in details. 

  • Manual Bookkeeping
  • Computerized Bookkeeping
Manual Book keeping

The basic function of hand-written bookkeeping clearly is that transactions’ details are written down by hand. This is a typical method which involves writing down income, expenses and other financial data in paper-based books or ledgers. Generally, it is the process that small business owner or an individual use which having no or basic account knowledge. 

Example:

Imagine you are the owner of a bakery of a small size. Here’s how you would record a purchase of ingredients and a sale manually.

 

Date Description Debit (₹) Credit (₹) 
 
Journal Entry (Purchase of Ingredients): 
May 1Purchased ingredients300
300 
    
Ledger Posting (Ingredients Account): 
May 1Purchase300 
    
Ledger Posting (Cash Account): 
May 1Purchase  300 
    
Journal Entry (Sale of Baked Goods): 
May 3 Sold baked goods 500 500 
    
Ledger Posting (Cash Account): 
May 3 Sale 500  
    
Ledger Posting (Revenue Account): 
May 3 Sale  500 
Computerized Bookkeeping 

It is a procedure of recording bookkeeping transactions with the use of computerized accounting software digitally. In this method, a computer does lots of the bookkeeping work, so that it can process numbers more promptly and effectively. 

Example: 

Using accounting software for your bakery, you would record the same purchase and sale digitally: 

 

Entering Purchase of Ingredients: 

Date Description Amount (₹) Category Payment Method 
May 1 Purchased ingredients 300 Expenses Cash 

 

Software Entry: 

Debit (₹) Credit (₹) 
Expenses Account 300 
Cash Account  

 

Entering Sale of Baked Goods: 

Date Description Amount (₹) Category Payment Method 
May 3 Sold baked goods 500 Revenue Cash 

 

Software Entry: 

Debit (₹) Credit (₹) 
Cash Account 500 
Revenue Account  

 

Generating Reports: 

Income Statement: Shows total revenue and expenses. 

Category Amount (₹) 
Revenue 500 
Expenses 300 
Net Income 200 

 

 

Balance Sheet: Displays assets, liabilities, and equity. 

Category Amount (₹) 
Assets 500 
Liabilities 0 
Equity 200 
Questions to Test Understanding

 

  • Which method requires only one entry in the journal for every financial transaction? 
  1. Double-Entry System
  2. Single Entry System
  3. Manual Bookkeeping
  4. Computerized Bookkeeping

 

  • What is a characteristic of the Double-Entry System? 
  1. Recording each transaction only once
  2. Using only paper-based books or ledgers
  3. Recording each transaction as debits and credits of two distinct accounts
  4. Maintaining records manually

 

  • Which system is best suited for small business owners or individuals with basic accounting knowledge? 
  1. Double-Entry System
  2. Single Entry System
  3. Manual Bookkeeping
  4. Computerized Bookkeeping

 

  • Which method utilizes computerized accounting software to record transactions digitally? 
  1. Double-Entry System
  2. Single Entry System
  3. Manual Bookkeeping
  4. Computerized Bookkeeping

 

  • In the Double-Entry System, what is maintained to reflect financial transactions accurately? 
  1. Single entry in the journal
  2. Accounting equation as Assets = Liabilities + Equity
  3. Paper-based ledgers
  4. Basic income and expense records

 

Conclusion 

There are two types of bookkeeping systems, Single Entry and Double-Entry. Single Entry means one journal entry for each transaction and is appropriate for businesses whose volume of transactions is lower. Double-Entry is the process of each transaction involving debits and credits while keeping the accounting equation balanced. There are two ways of book-keeping: manually, by use of a book and his pen, or computerized, using software and processed more efficiently using computers.

FAQ’s Types & methods Of Book keeping

The single-entry system and the double-entry system are the two bookkeeping procedures used in India. 

The Single-Entry System is a straightforward system ideal for small businesses, recording each transaction in the journal only once. 

A double-entry system records a transaction in two parts: a debit and a credit, into two distinct accounts; it does so in order to assume balance in financial records.
 Small businesses have few transactions, which is why they use the single-entry system because it is simple.
Large enterprises greatly favour the double-entry system because it provides them with superior financial transaction information and safeguards the accounting equation, where assets equal the sum of liabilities and equity.
Manual bookkeeping and computerised bookkeeping are the two primary bookkeeping methods.
Manual bookkeeping refers to the process of keeping financial transaction records by hand on paper, mostly in books or ledgers. The owner of a small business or an individual with basic accounting knowledge typically handles manual books of accounts.
Computerised bookkeeping means recording transactions in software that converts them into an electronic form and further enables one to process financial data relatively faster and more effectively.