Encountering Deviations From Standard Methods
Peter Marshall Bsc (Econ) BA MBIM is a Fellow of the Society of Business Teachers, and an experienced educator in business subjects. He is also a prolific author and his books have been translated and sold worldwide. He lives in London, UK.
This book seeks to teach the principles of double entry book-keeping. However, readers may, in the course of their careers, come across small businesses which use single entry methods.
The Simplex system
The most common single entry method is the Simplex system. This is an integrated system involving two books. One is designed for recording daily takings, daily payments and a weekly cash and bank account. All are dealt with on the same page and one page is used per week. The balances of the cash and bank accounts are carried forward to the next week, as the opening figures.
There are special VAT recording arrangements for small businesses. In corner shops for example, it would be burdensome to record each individual item of sale separately—a bar of chocolate to one customer, a newspaper to another and a ballpen to another, for example. In such cases therefore, there are special formulae for computing the VAT payable or repayable. There are a number of different schemes to suit the particular problems of different types of business. In recognition of this the Simplex range contains different versions of the daily takings and purchases book for each scheme.
The second of the two books is a sales and purchases record.
At the end of the daily takings and purchases book there is an analysis section. By following guidance notes printed on the page, owners of businesses can compile their draft profit and loss accounts and balance sheets.
The slip system
As was pointed out on page 5, in double entry book-keeping the sources of information for posting to the ledger are the books of prime entry. Nothing should be posted directly from, for example, an invoice, or credit note.
However, this rule is sometimes broken. Occasionally, you’ll find this stage bypassed and entries made directly into the ledger. This is called the slip system. It is used where accounts have to be kept very up to date, such as in banking and wherever automated systems are used. Where postings are made directly to the ledger, from invoice copies, those copies are filed to form the equivalent of the day book. This I call the slip + 1 system, because an extra invoice copy is needed.
In the accounts of some very small firms, the ledgers, too, are sometimes dispensed with. Instead, the invoices (or copies in the case of invoices sent out) are merely filed together with other unpaid ones, in date order. This takes the place of the personal ledger (sales and purchase). When each is paid it is stamped and removed to be filed with all the paid ones. This version I call the slip + 2 system, because two additional copies of each invoice are needed.
For the ‘slip + 1’ version a firm’s invoices really need to be printed in triplicate. For the ‘slip + 2’ version they need to be in quadruplicate.