Question

The single entry system is defective because,
I. Only one account is maintained.
II. The trial balance cannot be prepared.
III. The net profit cannot be accurately calculated.
IV. The possibility of fraud and misappropriation is great.
Select the correct answer from the following.

• A. I, III and IV
• B. I and II
• C. II, III and IV
• D. I only

Answer 1

The correct option is C II, III and IV

Double entry system is a scientific system of accounting. For every debit there will be credit. By following this method profits are calculated on accurate basis with minimal possibility of fraud.

Single entry system is defective because trial balance can not be prepared, net profit can not be calculated accurately and there is a possibility of fraud.