Double-entry vs. single-entry bookkeeping: what’s the difference?

When you set up a new business, one of the first things you need to decide is which bookkeeping system to use — double-entry or single-entry.

For non-accountants, it can seem like a tough call to make. Both have pros and cons. Unless you’re already well-versed in bookkeeping and financial management, it can be hard to know which one to choose for your business.

In this discussion, we’ll explain double-entry and single-entry bookkeeping and give you the info you need to decide which one is right for your business.

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What is double-entry bookkeeping?

Double-entry bookkeeping is the standard accounting method used by businesses of all sizes. It records every transaction in two places: once as a debit and once as a credit. This approach ensures your books stay balanced and that you’re accurately tracking your assets, liabilities, and equity.

At its core is the accounting equation:

Assets = Liabilities + Equity

This equation helps business owners understand the relationship between what they own, owe, and have invested in the company. If the equation doesn’t balance, it signals an error that needs to be addressed.

This system is compliant with Generally Accepted Accounting Principles (GAAP) and makes it easier to generate professional financial statements, track profitability, and avoid costly mistakes.

Pros

• Accurate and reliable: Tracks both sides of each transaction, ensuring books stay balanced.
• Error detection built in: Helps identify and correct mistakes automatically.
• Supports financial growth: Enables the generation of complete financial statements and reporting.
• GAAP-compliant: Required for businesses that follow Generally Accepted Accounting Principles.

Cons

• More complex to manage manually
• Requires accounting software or expert support
• Not ideal for very simple, cash-only businesses

How to Implement Double-entry Bookkeeping

To implement a double-entry bookkeeping system, you need a Chart of Accounts and five account categories: Asset, Liability, Equity, Income, and Expense. Keep these debit and credit rules in mind:

• A debit entry increases asset and expense accounts.
• A credit entry increases liability, equity, and income accounts.
• The total number of debits and credits can be different in a particular journal entry.
• The total dollar amount of debits and credits must be equal.

Start by recording each journal entry, using the rules listed above.

As you post journal entries, you or your bookkeeper can review the activity by producing a trial balance, which is a listing of each account and the current balance in the account. If everything is going smoothly, the total debits and credits on the trial balance should be equal. Software like QuickBooks can automatically check to see if your books are adding up.

Double-entry bookkeeping example

If the person in charge of the books had omitted one of the debit or credit entries from the example above, the total dollar amount of the credits and debits would differ, revealing an error and allowing for correction.

What is single-entry bookkeeping?

Single-entry bookkeeping is a simplified accounting method that records each transaction once, similar to maintaining a personal checkbook. It tracks only income and expenses and does not account for assets, liabilities, or equity.

This method is straightforward to manage, making it a common starting point for sole proprietors, freelancers, or small businesses with limited financial activity.

However, single-entry bookkeeping is often referred to as an "incomplete" financial system. Because it only logs one side of each transaction, it can’t generate full financial statements, lacks error detection, and leaves businesses more vulnerable to inaccuracies and fraud.

Pros

• Simple and fast: Requires no accounting background or training to manage.
• Minimal setup: A spreadsheet is enough, no accounting software or tools required.
• Low cost: Suitable for freelancers or solo entrepreneurs managing straightforward cash transactions.** No need for professional bookkeeping services at early stages.

Cons

• Doesn’t track assets or liabilities
• No financial statements
• Prone to errors and fraud

How to implement sungle-entry bookkeeping

The simplest way to do single-entry is to first set up a spreadsheet with three columns: Date, Transaction Description, and Amount.

In the top row, record the starting balance for the period you’re accounting for. Then record each transaction with the date, description, and amount. Parentheses indicate outflows and non-bracketed numbers are inflows. At the end of the accounting period, just calculate the remaining balance.

You can also add a little complexity to this system by introducing two columns, one for revenue and one for expenses. This is still considered to be a single-entry system, because each transaction is only entered once.

Single-entry bookkeeping example

Let’s take the example from the image above. The business owner records the starting balance of $5,670 in the top row and records all other transactions as either positive or negative beneath the starting balance.

At the end of the period (in this case, a week), they calculate the total after subtractions and additions.

For argument’s sake, imagine that the business owner slipped up and posted the daily product sales amount as $5,000, instead of the correct $4,000 With single-entry bookkeeping, that error would go unnoticed until a bank statement with an unexpectedly low balance arrived in the mail. In the interim, the business could have been mistakenly spending money it didn’t have.

Single-entry bookkeeping vs double-entry bookkeeping: which should you use?

Some businesses, including publicly owned companies, are legally obligated to follow GAAP principles. Therefore. they have to use the double-entry system. Private companies that use accrual bookkeeping also have to apply double-entry bookkeeping.

Any startup that is considering funding rounds in the future should implement double-entry bookkeeping as soon as possible. Investors will want access to a complete set of financial statements built off professional bookkeeping, and you’ll need to build your pitch deck off of solid financial projections. Single-entry bookkeeping won’t allow you to do that.

On top of that, any business that handles anything other than cash transactions needs to use double-entry bookkeeping. For example, if your business buys or sells on credit, then you need to implement a double-entry system.

Single-entry bookkeeping is an option if:

• You’re a solo-preneur or sole proprietorship.
• You have only cash transactions built off cash-basis accounting.
• You have few physical assets and few employees.

Bear in mind that while you’ll be able to prove income tax reporting and calculate net income, you won’t be able to generate a complete set of financial statements. This will limit your ability to win investments down the road and may lead you to switch accounting systems at some point.

How Pilot turns double-entry bookkeeping into a growth advantage

Starting out with double-entry bookkeeping, even when your business is small, is the best long-term plan. Building the structures that support scaling and growth will open up investment opportunities, streamline financial management, and allow you to make wiser financial decisions.

Whichever method you choose, it pays to have a team of expert bookkeepers using powerful software behind you. Try Pilot, where we combine both, giving you error-free, investor-ready financials from day one.

Key takeaways

• Single-entry bookkeeping is simple and works for small businesses or freelancers, but it lacks built-in error detection and doesn’t track assets or liabilities.
• Double-entry bookkeeping provides a complete financial picture, supports reporting for investors and lenders, and is the standard for growing or funded businesses.
• Most businesses outgrow single-entry quickly as finances become more complex, making double-entry essential for scalability, tax prep, and compliance.
• Pilot offers professional double-entry bookkeeping done for you, combining expert oversight with powerful software so you can focus on running your business.