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P2 C10 Accounts from Incomplete Records — Account STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceAccountP2 C10 Accounts from Incomplete Records3 Marks
Question
Discuss the limitation of Single Entry System in detail.
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Answer

Limitations of Single Entry System : They are as follow. $(i)$ Only importance given to personal account : the system, in Account book only personal account is recorded. Where in personal account are not recorded. So, information of income, expenditure and assets are not $(ii)$ Trial Balance cannot be prepared : As dual effect of all the transactions are not recorded by the businessman, trial balance cannot be prepared. Hence, it is not possible to check the arithmetical accuracy of the account. $(iii)$ Profit and loss cannot be ascertained : As income and expenditure account is not prepared, it is not possible to know the profit or loss at the end of the yeardouble entry system. $(iv)$ Final Accounts cannot be prepared : In this method as asset accounts are not kept and trial balance is also not prepared, it is not possible to prepare final accounts.It is not possible to know the true and fair financial position of the business. $(v)$ Manipulation in Accounts : There is no control in this method like in the doubleentry system. So, there are more possibilities of errors, fraud or manipulation inaccount. $(vi)$ Lack of Accurate information : It is not possible to get the accurate information about the trading operation because complete records are not kept for all transactions.Hence it creates problems in trading operation. $(vii)$ Comparison is not possible : In this system, there is no similarity in account thatwhy there is no comparison in different years. $(viii)$ Hard to solve problem : In this system, all records are not available, so we can'tfind the error and solve it. It’s difficult to find. $(ix)$ Impossible to make decision : Due to insufficient record of information, important decision cannot be made like to decide purchase price of business, take insuranceof business, borrow loan etc. making decision impossible. $(x)$ Lack of trust : In this system, accounts have incomplete records, like bank, insurancecompanies, government taxation department etc. are not counting it as a trustworthy. $(xi)$ Lack of proper management: Accounting system provide proper information tobusiness management. In this system there is incomplete records on that basisorganisation get incomplete information. So, there is problem in business organisation.

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