The limitations of Single entry system of bookkeeping are as follows :
(a) As double entry system is not followed, a trial balance cannot be prepared and accuracy of accounts cannot be ensured.
(b) Correct ascertainment and evaluation of financial result of business operations cannot be made.
(c) Analysis of profitability, liquidity and solvency of the business cannot be done. This may cause a problem in raising funds from outsiders and planning future business activities.
(d) The owners face great difficulty in filing an insurance claim with an insurance company in case of loss of inventory by fire or theft.
(e) It becomes difficult to convince the income tax authorities about the reliability of the computed income.
