4 Types of Bookkeeping System


Bookkeepers and accountants depend on a system to effectively and efficiently complete their daily tasks. A steady bookkeeping system allows them to calculate company books automatically or manually and comply with federal regulations. One of the many systems that track accounting-related expenses and files is used for automation, bookkeeping, and other technology in accounting.

It is important to understand how they work and if they are compatible with your business.

It is important to understand all your options, whether you are looking to use these systems for manual calculations or to opt for an electronic solution to manage your books. These are the most popular types of bookkeeping systems, and how they work.


1. Single-Entry System

This single-entry system is the most popular for small business owners. Although it is simpler than other systems, it can be difficult to track large volumes of data.

Because each item has its own entry in the accounting records, it’s known as a single-entry system. It is mainly focused on cash sales and business expenses. It is unable to keep track of more complex expenditures so it should be avoided by large businesses.

Single-entry systems only work if items are entered at the time they are incurred. To monitor transactions, it uses cash disbursements journals and cash sales journals.

These journals are kept track of transactions that recur. The recordings are compared with the bank account at the end of a specified period, such as a week, or month.


This is a great way for startups and small businesses to keep track of their accounts with a budget. It is easy to use and most business owners don’t have to hire any outsourced help. You can do it with Excel spreadsheets or by hand. Because there isn’t much data, it’s easier to calculate loss or profit for a given period.


2. Double-Entry System

The double-entry system works by posting single transactions first as income or expense. It then creates a second entry that tracks the transaction to the correct account. You can track five transactions simultaneously: revenues, expenses, assets, liabilities, and equities.

It can also use debits or credits to track changes within accounts. It works under the 2-fold effect. This means that for every amount received (debit), there must also be a credit given up (credit). It is crucial to be able to identify the effects of a business transaction on financial records.

This allows you to keep track of your current financial records and make predictions about the future.


While smaller businesses may choose to adopt the double-entry system, larger businesses must adopt it. Businesses with gross sales exceeding $5 million or gross receipts above $1 million for inventory sales are required to use the double-entry method. A single-entry system cannot handle the complexity of large companies.

Double-entry is preferred by many business owners because it makes it easier to understand your financial statements. Each transaction is recorded and it is clear how it affects the associated account.

It provides a clear picture of the financial health of any company. It allows you to easily compare different periods and identify growth patterns, losses patterns, and other important details. Companies can get a comprehensive view of their financial potential and plan accordingly.


Bookkeeping Systems

3. Computer Software

Bookkeeping systems can be difficult to comprehend and operate for the average bookkeeper. The market has created hundreds of computerized systems.

Bookkeeping software is available for small and large businesses. With simple interfaces, small businesses can keep track of transactions and accounts. A basic accounting system will suffice.

A bookkeeper is likely to be required for large businesses. However, computerized software can help you stay on the same page. A customized system will be required to meet their specific needs, as every business is different.

Automation is the best thing about computerized systems. It can accurately record receivables as well as payables using real-time transactions. It improves accuracy and speeds up transaction processing.

It can be expensive and may require assistance to get it set up. The system is not foolproof as many people would like it to be. It’s possible to steal or manipulate financial data, which can have a negative impact on the bottom line. It’s still an effective option for businesses in search of affordable, flexible services.


4. Virtual Bookkeeping

Virtual bookkeepers are online agents who manage your books. For those who find the double-entry and single-entry systems complex and difficult to manage, virtual bookkeeping is a common option.

Virtual bookkeepers are a great option for an accountant or bookkeeper in-house. They cost only a fraction of what an employee on-site would, but they are just as efficient.

Virtual bookkeepers can handle all accounting-related items, but most commonly they are used to issue invoices, payroll ledgers, and expense receipts. They will use the single- or double-entry bookkeeping system for you.

Virtual bookkeepers typically request that you use particular accounting software. They might ask you to purchase QuickBooks in order to keep track of your receipts and transactions. They will be able to access your account and organize, track, and reconcile all your accounts. This makes things easier for everyone.

You can discuss other options with your virtual bookkeeper if that doesn’t work. They will work with you to create an accounting system that is easy on your back and puts all your files in order.

While the most obvious benefit of using a virtual bookkeeper is its cost savings, there are other benefits. You can have your virtual bookkeeper work when it suits you. Access to the most current tools and federal regulations will also be available. These bookkeepers may also offer other services such as tax preparation.


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