The simple item, also called the cash book or accounting of income and expenses, is one where a record of monetary inputs and outputs is made, so that a final balance is calculated as the difference between the two.
This method is, therefore, a simple entry for each of the accounts, but without any counterpart. In this way, it is noted when there are entries or entries and expenditures or exits. By its nature, its balance should always be debtor or zero, as there was no parallel entry. It is no longer used and has been replaced by more sophisticated ones.
Origin of the simple game
Accounting has been known since ancient times, having been practiced by the Phoenician or Roman merchants, among others. Until the fourteenth century this method was the most widely used, so that operations were usually recorded in a single account. As there were still no credit markets, this way of accounting was more than enough to manage cash, suppliers and customers.
However, it had a number of drawbacks, especially when accounting for operations such as loans. These were solved with the creation of the double entry method, much more appropriate as there is always a departure and a counterpart. With it, you could establish relationships between accounts, something that had not happened before.
Disadvantages of this accounting method
This method, although simple, had a series of drawbacks or limitations that we show below:
- First of all, its simplicity. In the complex operations that arose with the debt markets, this method was no longer valid. The accounts could not be related to it, for example, in the granting of a loan and the simultaneous deposit of money in the box.
- It does not allow adequate control of equity or fixed assets accounts. There was no internal control of the accounts.
- As there were no entries that related two or more accounts, there was no relationship between the newspaper and the major. It was difficult to control increasingly complex operations.
Simple game examples
Some examples would be the following:
- Accounting of a payroll. We have as inputs the income of the same and as outputs, the different expenses or withdrawals of money.
- The accounting of the box of the old merchants was done by this method. The inputs would be the collections and the outputs the income.
- The G / L accounts of customers and suppliers of those same merchants, which functioned in a similar way to the cash register. The inputs were the purchases or sales and the outputs the collections or payments.
To finish, let's look at a numerical example of a cash account. In it, an initial balance of € 1,000 is given, a payment of 200 and a collection of 500 are produced and with these data the final balance is calculated. The process would be the following:Diary book Ledger
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