Concept of Social Accounting, Social Audit and Cash-Based Single Entry System of Accounting
Notes for Competitive Examinations (JKSSB, SSC, Banking, Accounts Exams)
Prepared by Home Academy
1. Concept of Social Accounting
Introduction
Social Accounting is a system of accounting that measures and reports the social and environmental impact of an organization’s activities on society.
Traditional accounting records only financial transactions, but social accounting evaluates social responsibility, environmental protection, and community welfare created by an organization.
It is mainly used by:
Government organizations
Public sector undertakingsNGOs
Large corporations practicing Corporate Social Responsibility (CSR)
The concept became important after the rise of sustainable development and corporate accountability.
Definitions
Howard Bowen (Father of CSR):
Social accounting refers to reporting the social impact of business decisions on society.
Simple Definition:
Social accounting is the process of identifying, measuring and communicating social effects of an organization’s economic activities.
Objectives of Social Accounting
To measure the social performance of organizations.
To ensure corporate social responsibility (CSR).
To promote transparency and accountability.
To evaluate the impact of business on environment and society.
To help stakeholders assess ethical behaviour of organizations.
Features of Social Accounting
Focus on social welfare rather than profit
Includes environmental responsibilityMeasures non-financial activities
Helps maintain public trust
Promotes sustainable development
Areas Covered in Social Accounting
| Area | Explanation |
|---|---|
| Environmental Protection | Pollution control, waste management |
| Employee Welfare | Health benefits, fair wages |
| Community Development | Schools, hospitals, infrastructure |
| Consumer Protection | Quality goods and services |
| Ethical Business Practices | Honest and transparent operations |
Importance for Competitive Exams
Social accounting helps governments and organizations evaluate:
Social benefits created by projects
Environmental protection effortsCorporate responsibility
Welfare programs
It is often asked in public finance and accounting exams.
Limitations of Social Accounting
Difficult to measure social benefits in monetary terms.
Lack of standard accounting rules.
Time-consuming and complex.
Sometimes organizations may manipulate social reports for publicity.
2. Social Audit
Introduction
A Social Audit is a systematic evaluation of how well an organization performs its social responsibilities and welfare activities.
It checks whether public funds and welfare schemes are properly used for the benefit of society.
Social audit is widely used in government welfare schemes and rural development programs.
Definition
Social Audit is the process of reviewing and evaluating the social performance and impact of an organization or government program.
Objectives of Social Audit
Ensure transparency in public spending.
Improve accountability of government institutions.
Evaluate effectiveness of welfare schemes.
Encourage public participation in governance.
Prevent corruption and misuse of funds.
Key Elements of Social Audit
| Element | Explanation |
|---|---|
| Public Participation | Citizens participate in evaluation |
| Transparency | Open access to records |
| Accountability | Officials responsible for actions |
| Community Monitoring | Local communities monitor projects |
| Verification | Physical verification of work |
Steps in Social Audit
Collection of information
Public meeting (Gram Sabha)
Verification of records
Field inspection
Preparation of social audit report
Corrective action
Social Audit in India
Social audit is widely used in schemes such as:
MGNREGA
Public Distribution SystemRural development programs
Panchayat development projects
It ensures citizen oversight over public expenditure.
Advantages of Social Audit
Reduces corruption
Improves transparencyEnsures effective use of funds
Strengthens democracy
Increases community participation
Limitations of Social Audit
Lack of awareness among citizens
Political interferencePoor record keeping
Weak implementation in some areas
3. Cash-Based Single Entry System of Accounting
Introduction
The Single Entry System is an incomplete accounting system where only one aspect of a transaction is recorded.
Unlike the Double Entry System, it does not record both debit and credit.
This system is commonly used by:
Small businesses
ShopkeepersIndividual traders
When transactions are recorded only when cash is received or paid, it is called Cash-Based Single Entry System.
Definition
Single entry system is a simple accounting method where only partial records of financial transactions are maintained.
Characteristics of Single Entry System
Maintains cash book and personal accounts
Does not maintain complete ledger accountsProfit determined through capital comparison method
Mostly cash transactions recorded
Used by small business organizations
Features of Cash Based Accounting
| Feature | Explanation |
|---|---|
| Record only cash transactions | Income recorded when received |
| Expenses recorded when paid | No accrual concept |
| Simple and easy | Suitable for small businesses |
| Incomplete records | Not suitable for large organizations |
Capital Comparison Method
Profit is calculated by comparing capital at two dates.
Formula
Profit = Closing Capital – Opening Capital + Drawings – Additional Capital
Difference Between Single Entry and Double Entry System
| Basis | Single Entry System | Double Entry System |
|---|---|---|
| Recording | Partial | Complete |
| Accuracy | Less reliable | Highly reliable |
| Trial Balance | Not prepared | Prepared |
| Suitable for | Small traders | Large organizations |
| Error detection | Difficult | Easy |
Advantages of Single Entry System
Simple and easy to maintain
Requires less accounting knowledgeSuitable for small businesses
Low cost of accounting
Disadvantages
Incomplete records
Difficult to detect fraudNo accurate profit calculation
Financial position cannot be properly determined
Important Points for Competitive Exams
Social accounting measures social impact of business activities.
Social audit evaluates social performance and welfare activities.
Social audit is widely used in government welfare schemes.
Single entry system records only one aspect of transaction.
Double entry system follows dual aspect concept.
Profit in single entry is calculated by capital comparison method.
Cash based accounting records transactions only when cash changes hands.
Social accounting supports corporate social responsibility (CSR).
Most Important MCQ Questions
MCQ 1
Social accounting mainly measures:
A. Profit
B. Financial position
C. Social impact of business activities
D. Sales
Answer: C
MCQ 2
Social audit is mainly used to evaluate:
A. Bank transactions
B. Social welfare performance
C. Production efficiency
D. Financial profits
Answer: B
MCQ 3
Single entry system is also called:
A. Incomplete accounting system
B. Scientific accounting system
C. Accurate accounting system
D. Balanced accounting system
Answer: A
MCQ 4
Profit under single entry system is calculated by:
A. Trading account
B. Profit and loss account
C. Capital comparison method
D. Trial balance
Answer: C
MCQ 5
Cash based accounting records transactions when:
A. They occur
B. Cash is received or paid
C. Goods are produced
D. Accounts are closed
Answer: B
Previous Year Questions (PYQ)
PYQ 1 (SSC)
Which accounting system records only one aspect of transaction?
A. Double entry
B. Single entry
C. Cost accounting
D. Financial accounting
Answer: B
PYQ 2 (Banking Exams)
Social audit is mainly associated with:
A. Corporate profit
B. Welfare programs
C. Banking system
D. Taxation system
Answer: B
PYQ 3 (UGC NET)
Social accounting focuses on:
A. Financial reporting
B. Environmental and social performance
C. Bank reconciliation
D. Tax calculation
Answer: B
Quick Revision Table
| Topic | Key Concept |
|---|---|
| Social Accounting | Measures social impact |
| Social Audit | Evaluation of welfare performance |
| Single Entry System | Incomplete accounting system |
| Cash Based Accounting | Record when cash received or paid |
| Profit Calculation | Capital comparison method |
Case-Study Based Questions in Accounting
Prepared by Home Academy
1. Case Study – Social Accounting
Case Scenario
A large manufacturing company started a program to improve the living standards of the surrounding community. The company built schools, planted trees, reduced pollution emissions, and provided free health camps for workers and nearby villagers.
The company also prepared a report showing the social benefits created by these activities.
Questions
Q1. The report prepared by the company is an example of:
A. Financial accounting
B. Social accounting
C. Cost accounting
D. Management accounting
Answer: B
Explanation: Social accounting measures social and environmental contributions of organizations.
Q2. Which of the following activities in the case represents environmental responsibility?
A. Building schools
B. Conducting health camps
C. Reducing pollution emissions
D. Paying wages
Answer: C
Q3. Social accounting mainly benefits:
A. Shareholders only
B. Society and stakeholders
C. Bankers only
D. Tax authorities only
Answer: B
2. Case Study – Social Audit
Case Scenario
A village received government funds under a rural employment scheme. After six months, the villagers conducted a meeting where they examined official records, inspected construction work, and questioned the local officials about the use of funds.
They then prepared a report highlighting irregularities in the project.
Questions
Q1. The process described in the case is called:
A. Financial audit
B. Cost audit
C. Social audit
D. Management audit
Answer: C
Q2. The main objective of this process is to ensure:
A. Profit maximization
B. Transparency and accountability
C. Tax compliance
D. Cost reduction
Answer: B
Q3. Social audit encourages:
A. Private ownership
B. Citizen participation in governance
C. Bank supervision
D. Corporate monopoly
Answer: B
3. Case Study – Cash-Based Accounting
Case Scenario
Mr. Ali runs a small grocery shop. He records transactions only when cash is received or paid. He does not maintain full accounting records and only keeps a cash book and a record of debtors.
At the end of the year, he calculates profit by comparing his opening capital and closing capital.
Questions
Q1. The accounting system used by Mr. Ali is:
A. Double entry system
B. Single entry system
C. Cost accounting system
D. Standard costing
Answer: B
Q2. Recording transactions only when cash is received or paid refers to:
A. Accrual basis accounting
B. Cash basis accounting
C. Double entry system
D. Standard costing
Answer: B
Q3. Profit in such a system is usually calculated by:
A. Trading account
B. Profit and loss account
C. Capital comparison method
D. Balance sheet method
Answer: C
4. Case Study – Detection of Accounting System
Case Scenario
A small business maintains only:
Cash book
Personal accounts of customers
No trial balance
No profit and loss account
The owner estimates profit by comparing capital at the beginning and end of the year.
Questions
Q1. This accounting method is:
A. Complete accounting system
B. Single entry system
C. Double entry system
D. Cost accounting system
Answer: B
Q2. Which of the following is a major limitation of this system?
A. High cost
B. Incomplete records
C. Difficult calculations
D. Excessive documentation
Answer: B
5. Case Study – Government Welfare Program
Case Scenario
The government launched a housing scheme for poor families. To ensure that funds are properly used, local citizens review financial records, inspect houses constructed, and report misuse of funds to authorities.
Questions
Q1. This monitoring process is called:
A. Financial reporting
B. Social audit
C. Bank audit
D. Cost audit
Answer: B
Q2. Social audit primarily improves:
A. Profitability
B. Transparency in governance
C. Shareholder wealth
D. Market competition
Answer: B
Most Expected Case-Study MCQs for JKSSB
| Question Focus | Concept Tested |
|---|---|
| Community welfare activities of companies | Social Accounting |
| Citizen review of government schemes | Social Audit |
| Recording only cash transactions | Cash-Based Accounting |
| Incomplete accounting records | Single Entry System |
| Profit calculation by capital method | Single Entry System |
Quick Exam Trick
If the question mentions:
Community welfare + environmental impact → Social Accounting
Public monitoring of government schemes → Social Audit
Incomplete records + capital comparison → Single Entry System
Transactions recorded only when cash paid/received → Cash Basis Accounting