Single-entry bookkeeping

What it means

Single-entry bookkeeping tracks money received and paid, not revenue and costs. Sole traders and the legal forms listed in the Accounting Act use it; a company such as an s. r. o. may not.

It rests on a cash journal supplemented by books of receivables, payables and auxiliary records. The difference from double-entry bookkeeping is when an event is recognised: here only when the money moves.

Even single-entry bookkeeping is not purely about cash. Buying a car or a machine does not become an expense on the day it is paid for, but gradually through tax depreciation. Conversely, a business loan received is not income and repaying it is not an expense, even though money moves. The cash journal therefore separates movements that affect the tax base from those that do not.

How it works in practice

The advantage is less work and paying tax on money actually received. The drawback is a weaker picture: the journal shows neither margin nor stock levels, nor how much is owed in either direction.

So even under single-entry it pays to keep a list of unpaid invoices and of stock. A sole trader also weighs this regime against flat-rate expenses, where record-keeping is simpler still.

At year-end we prepare, from the sole trader’s cash journal, the statement of income and expenditure and the statement of assets and liabilities, which together make up the closing under single-entry. The type B tax return is built on them. Before that we go through unpaid invoices and the cash balance with the client, because those are what most often drift away from reality during the year.

What to watch out for

Switching between systems is done as of the first day of an accounting period and requires open items to be settled specifically. And a closing is still prepared under single-entry - it simply takes a different form.

A common mistake is mixing private and business money in one account. A private purchase recorded as an expense turns into a non-deductible expense at inspection, with extra tax and a penalty, while an unlabelled deposit from personal savings can look like undeclared income. Every movement unrelated to the business is recorded in the journal as outside the tax base.