Ose, a sole proprietor, does not keep proper books of account.
(a) Identify and explain the system of bookkeeping Ose operates.
(b) State three advantages and three disadvantages of the bookkeeping system Ose operates.
(a) Ose is operating a single-entry system of accounting.
A single-entry system of accounting involves not recording the transaction with double entry system. It means that there are no ledger accounts nor a balance sheet.
(b) Advantages of single entry
i. It is cheap since you will not need to employ an accountant to do the double entry system.
ii. It is easy to understand for a layman.
iii. It is easy for reviewing and minimal error.
Disadvantage of single entry
i. It cannot be used for formal purpose such as application for grants and loans.
ii. It does not show whether the business is making profit or loss
iii. It does not reveal the true financial position of the business.
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