While there are several positives that come with using the single entry system, it also has its fair share of downsides too. Due to the fact that it does not contain all information relating to the business, management will not have full access to data that is necessary for running a company. This leads to an administrative process that is not as accurate as it could be and therefore reduces the control that one might have over the day to day running of the business.
With single entry bookkeeping it is the case that assets and liabilities are usually recorded but only with a single entry for each. This means that theft and other losses are less likely to be detected. In fact it is the case that one person, i.e. the one in charge of the accounts, could single handedly cook the books and misappropriate the company’s financial resources.
Thus the above circumstances mean that it is impossible to compile a comprehensive overview of a company’s financial condition. This affects not just current managers and investors, but also potential future investors as well, as a financial statement prepared via single entry accounting processes are not a viable indicator for overall business performance.
Whereas the double entry accounting system requires that each entry matches, this is not the case with the case with the single entry system, making it much more prone to accounting errors. As might be expected then this also means that auditing is not possible with single entry bookkeeping.