Cuff accounting, more commonly known as single-entry accounting, uses a single financial entry such as a plus or a minus to record transactions. This differs from a double-entry system where each transaction has two entries: a credit and a debit. It is a very simple form of bookkeeping and is similar to keeping a checkbook ledger where an entry is made for each deposit and expense, and usually includes the date, transaction type and dollar amount. The dollar amounts may be listed in one column, with a parenthesis designating a negative amount, or there may be multiple columns with one for Income and the rest for various types of expenses, such as rent and telephone. Even with columns for different expenses, this type of accounting is still considered single-entry accounting.
Disadvantages of Cuff Accounting
While cuff accounting is commonly used by small business, it only tracks income and expenses. Asset and liability accounts, such as accounts receivable, accounts payable and inventory, require separate tracking. There is no direct link between income and asset accounts such as a sale reducing inventory and increasing accounts payable. Single-entry accounting makes it more difficult to determine the financial strength of a company at any point in time because of this lack of linkage. Errors in arithmetic can be harder to detect as well, similar to errors not found in a personal checkbook until it is reconciled to a bank statement.