CONCEPT OF SOCIAL ACCOUNTING, SOCIAL AUDIT AND CASH BASED SINGLE ENTRY SYSTEM OF  ACCOUNTING 

CONCEPT OF SOCIAL ACCOUNTING, SOCIAL AUDIT AND CASH BASED SINGLE ENTRY SYSTEM OF  ACCOUNTING  JKSSB
 CONCEPT OF SOCIAL ACCOUNTING, SOCIAL AUDIT AND CASH BASED SINGLE ENTRY SYSTEM OF  ACCOUNTING  JKSSB


 JKSSB PANCHAYAT ACOOUNT ASSISTANT STUDY MATERIAL

SOCIAL ACCOUNTING

The term ‘social accounting’ was first introduced into economics by J.R. Hicks in 1942. In his words, it means ‘nothing else but the accounting of the whole community or nation, just as private accounting is the accounting of the individual firm’. 

 

Social accounting, also known as national income accounting, is a method to present statistically the inter-relationships between the different sectors of the economy for a thorough understanding of the economic conditions of the economy. 

 

It is a method of studying the structure of the body economic. It is a method of studying the structure of the body economic. It is a technique of presenting information about the nature of the economy with a view not merely to get an idea of its prosperity, past or present, but also to get guidelines for state policy to influence or regulate the economy. 

 

In the words of Edey, Peacock and Cooper: “Social accounting is concerned with the statistical classification of the activities of human beings and human institutions in ways which help us to understand the operation of the economy as a whole. 

 

The field of studies summed up by the words ‘social accounting’ embraces, however, not only the classification of economic activity, but also the application of the information thus assembled to the investigation of the operation of the economic system.” In other words, social accounting describes statistically the economic activities of the different sectors of the entire economy, which indicates their mutual relationships and provides a framework for analysis. 

 


 Objectives and scope of social accounting: 

Main objectives of social accounting are to help society by providing different facilities by enterprise and to record them. These are as follows: 

1. Effectives utilization of natural resources: 

Main objective of making social accounting is to determine whether the company is properly utilizing their natural resources or not. 

2. Help to employees: 

To identify whether the company can help employees by providing the facility of education to children of employees, providing transport free of cost and also providing good working environment conditions. 

3. Help to society: 

Industry polluted the environment which is very harmful for society. So, it has to identify whether the enterprise can help the society by planting the trees, establishing new parks near factory area and also opening new hospitals. 4. Help to customers: In social accounting this is the part of benefits given by company to society, whether the company supplies good quality goods at reasonable rate. 

5. Help to investors: 

To identify whether the Company help to investors by providing transparent accounting information, because of many objectives are related to safeguarding of natural resources. 

 

The scope of social accounting is very large since, it can be applied to many areas of social activities. In the absence of clear definition of corporate social responsibility by legislation, individual firm must decide for themselves the nature and cope of their social responsibility. However, with a view to facilitate corporate accountability, Brummet (1973) has find five possible areas in which corporate social objectives may be found and each area of contribution of corporate social activities may be measured and reported. 

 

1. Net Income Contribution: 

The basic objective of business is to earn profit. The growing attention towards social activities of the firm will not reduce the importance of profit to the firm. The corporate should ensure that the profit is earned within legal framework that is “profit in a socially acceptable manner". 

 

2. Human Resource Contribution: 

It reflects the effect of organization on the human resource of the organization. The organizational activities include: recruitment policies and practices, training, experience building, job enrichment, wage and salary, Congruence of employees and organizational objectives, job safety and Occupational health. 

3. Public Contribution: 

It reflects the impact of organizational activities on individuals generally outside the organization. The organizational activities include: General Philanthropy, General volunteer community activities, Training and employment of handicapped persons. 

 
4. Environmental Contribution: 

It reflects the impact of corporate activities on the environment. 

 

5. Product or Service Contribution: 

This area relates to the qualitative aspect of the organization’s product or service. It includes product utility, durability of product, product safety, and serviceability as well as the welfare role of the product or service. It also includes customer satisfaction, honesty in advertising their products etc. 

 
 Meaning and Definition of Social Audit: 

As the standards for measuring the total performance of the business enterprises are developed, the need for reviewing such accounting of social performance would also arise. As Bauerpoints out, “the concept of social audit is a vision that at some future time corporations will assess their social performance in as systematic a manner as they now assess their financial performance”. Such audit would be required both for public reporting and for internal management purpose. Therefore, it may be said that social audit is an assessment of the performance of an industry as a whole, vis-à-vis its responsibility. Since, the valuation made as to how much the enterprise has taken from the society and in return how much it gives to the society and the review as to safeguarding of the public of social interest by means of conducting business activities relate to social audit. 

 

 Principles of Social Audit: 

The foremost principle of Social Audit is to achieve continuously improving performances relative to the chosen social objectives. Eight specific key principles have been identified from Social Auditing practices around the world. 

1. Multi-Perspective: 

Aim to reflect the views (voices) of all those people (stakeholders) involved with or affected by the organization/department/ programme. 

2. Comprehensive: 

Aims to (eventually) report on all aspects of the organization’s work and performance. 

3. Participatory: 

Encourages participation of stakeholders and sharing of their values.

4. Multidirectional: 

Stakeholders share and give feedback on multiple aspects. 

5. Regular: 

Aims to produce social accounts on a regular basis so that the concept and  the practice become embedded in the culture of the organization covering all the activities. 

6. Comparative: 

Provides a means whereby the organization can compare its own performance each year and against appropriate external norms or benchmarks; and provide for comparisons to be made between organizations doing similar work and reporting in similar fashion. 

7. Verified: 

Ensures that the social accounts are audited by a suitably experienced person or agency with no vested interest in the organization. 8. Disclosed: Ensures that the audited accounts are disclosed to stakeholders and the wider community in the interests of accountability and transparency. These are the pillars of Social Audit. 

 SINGLE ENTRY SYSTEM 

 
SINGLE ENTRY 

Single entry system is an incomplete form of recording financial transactions. It is the system, which does not record two aspects or accounts of all the financial transactions. It is the system, which has no fixed set of rules to record the financial transactions of the business. Single entry system records only one aspect of transaction. Thus, single entry system is not a proper system of recording financial transactions, which fails to present complete information required by the management. Single entry system mainly maintains cash book and personal accounts of debtors and creditors. Single entry system ignores nominal account and real account except cash account. Hence, it is incomplete form of double entry system, which fails to disclose true profit or loss and financial position of a business organization. 

 

WHO KEEPS SINGLE ENTRY SYSTEM? 

Small businesses, such as shopkeepers, market stall holders, hairdressers, landscape gardeners, do not always have the knowledge, expertise and time to keep a complete set of accounting records. However, these businesses will need to have financial statements prepared annually (for tax purposes if nothing else). 

 

REASONS FOR INCOMPLETE RECORDS 

Incomplete records may be due to partial recording of transactions as is the case with small shopkeepers such as grocers and vendors. In case of large sized organizations, the accounting records may be rendered to the state of incompleteness due to natural calamity, theft or fire. Thus, partial recording of business transactions may takes place due to: 

 Lack of knowledge about double entry system. 

 Deliberate omission to maintain records to take advantage of taxation. 

 Unable to maintain his/her business transactions because of the time, effort & cost involved. 

 Loss of records due to fire, theft or natural calamity. 

 

FEATURES OF SINGLE ENTRY 

The following are the main features of single entry system: 

No Fixed Rules: 

Single entry system is not guided by fixed set of accounting rules for determining the amount of profit & preparing the financial statements.   

Incomplete System: 

Single entry system is an incomplete system of accounting, which does not record all the aspects of financial transactions of the business.   

Cash Book: 

Single entry system maintains cash book for recording cash receipts & payments of the business organization during a given period of time.   

   


 

 
Personal Account: 

Single entry system maintains personal accounts of all the debtors and creditors for determining the amount of credit sales and credit purchases during a given period of time. 

  
Variations in Application: 

Single entry system has no fixed set of principles for recording financial transactions and preparing different financial statements. Hence, it has variations in its application from one business to another. 

 
TYPES OF SINGLE ENTRY 

 

Pure Single Entry: 

Under this type of single entry, the dual aspect of each transaction is ignored. Only personal accounts of debtors and creditors are kept but no record is kept for real or nominal account. 

  Simple Single Entry: 

Under this system, (i) personal account and (ii) cash book are kept.   

Quasi Single Entry: 

Under this system, (i) personal account, (ii) cash book and (iii) some other subsidiary books are kept. 

 

ADVANTAGES OF SINGLE ENTRY 

 It is easy and simple method of recording business transactions. 

 Less expensive as qualified staff is not required. 

 Suitable for small businesses where cash transactions occur and very few assets and liabilities exists. 

 Flexible method as there are no set procedures and principles followed. 

 

DISADVANTAGES OF SINGLE ENTRY 

 No double entry, thus Trial Balance cannot be prepared to check the arithmetical accuracy of books of accounts. 

 Information related to assets and liabilities cannot be reliable because respective accounts have not been maintained. 

 True Profit and Loss cannot be ascertained. 

 Comparison of accounting performance with previous year or other firms not possible as any standard principle or procedure is not followed. 

 

DIFFERENCE BETWEEN STATEMENT OF AFFAIRS AND BALANCE SHEET 

The major difference between statement of affairs and balance sheet is that the statement of affairs is prepared under Single Entry System while balance sheet is prepared under Double Entry System. It means that statement of affairs consist of incomplete data so the degree of accuracy can be down. But balance sheet is prepared from the books of accounts so the degree of accuracy can be high. 

 

DIFFERENCE BETWEEN DOUBLE ENTRY SYSTEM AND SINGLE ENTRY SYSTEM 

1Double Entry System 

2Single Entry System 

 1.Under this system, both aspect of each transaction are recorded. 

 2.Under this system, both aspect of each transaction are not recorded. 

 1.In this system, personal, real and nominal accounts are kept fully. 

 2.In this system, only personal accounts are kept and real and nominal accounts are ignored. 

 1.In this system, cash book, general ledger, debtors’ ledger and creditor’s ledger are maintained. 

2. In this system, only debtor’s ledger and creditor’s ledger are kept. Cash book is also kept but personal transaction gets mixed up business transactions. 

 1.Under this system, arithmetical accuracy can be checked by preparing trial balance at any moment of time. 

 2.Under this system, the arithmetical accuracy cannot be checked.