Systems of Accounting

Mainly there are 3 systems of Accounting.

       1.Cash system of Accounting

      2.Mercantile system of Accounting

       3.Mixed system

Let's discuss about systems of Accounting.

CASH SYSTEM OF ACCOUNTING:

•   In this system, Accounting entries are made only when cash is received or paid. No entry is made when a payment or receipt is merely due.
• Generally non-profit organizations particularly professionals prepare receipts and payments account on this basis.

 MERCANTILE SYSTEM OF ACCOUNTING:

• This is also known as accrual system of accounting. Under this system entries are made on the basis of amounts having become due for payment or receipt.
• The objective of this system is to relate the revenue in terms of cost so that reported net income measures a firm's performance during a period instead of merely listing its cash receipts and payments.

 MIXED SYSTEM:

• This system is the mixed of cash system and mercantile system.
• Under this system Income are recorded on cash basis and expenses are recorded on accrual basis.
• The net income is ascertained by matching expenses on accrual basis with incomes on cash basis.

DOUBLE ENTRY SYSTEM:

• Double entry system is a scientific  way of presenting accounts. All business concerns feel it convenient to prepare the accounts under double entry system.
• Under dual aspect concept the accountant deals with the two aspects i.e, receiving aspect and giving aspect.
• Receiving aspect is known as 'Debit aspect' and giving aspect is known as 'Credit aspect'. These two aspects are useful in preparation of trail balance and final accounts.

SINGLE ENTRY SYSTEM:

• Single entry system is crude and unscientific method of maintaining accounts. Under this system all the transactions are not recorded.
• Some times the two aspects of a transaction are recorded and sometimes transactions are not recorded completely. So we may say that it is a mixture of double entry and no entry.
• The accounts maintained under this system are incomplete and unsystematic. They are not reliable, so it is not possible to prepare proper trail balance, profit and loss account under this system.
• It is useful to small business concerns.