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Difficulty: Very hardMeaning, Features, and Limitations of Single Entry System

Under a single entry bookkeeping system, although real and nominal accounts are omitted, the arithmetical accuracy of the accounting records can still be verified by preparing a Statement of Affairs at the beginning and end of the accounting period.

Answer: Answer

Answer

The statement is False.
In single entry bookkeeping, double-entry principles are not strictly applied to all transactions, rendering the extraction of a Trial Balance impossible. While a Statement of Affairs helps estimate capital and net profit, it does not serve as a check on the arithmetical accuracy of the books.

Step-by-Step Solution

1
Analyze the features of the single entry system.
Single entry maintains primarily cash and personal accounts while omitting real and nominal accounts.
Determining which accounts are missing establishes what financial checks are impossible to perform.
2
Examine the mechanism for checking arithmetical accuracy.
Arithmetical accuracy requires the extraction of a Trial Balance where total debits equal total credits.
Without complete double-entry records for nominal and real accounts, a Trial Balance cannot be prepared.
3
Evaluate the function of a Statement of Affairs.
A Statement of Affairs is structured like a Balance Sheet using estimated asset and liability balances to find capital, not to verify mathematical precision.
Confusing capital estimation with arithmetical verification is a common misconception.

Key Concept

Limitations of Single Entry System and Purpose of Statement of Affairs
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Topics

Meaning, Features, and Limitations of Single Entry System

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