Single-Entry vs Double-Entry Bookkeeping: When to Use Which

"Can I just track income and expenses in a spreadsheet?" is one of the most common questions new business owners in Latvia ask. The answer depends entirely on your legal structure — and for most SIA owners, it is a firm no.

Latvia recognizes two bookkeeping methods, and the law dictates which one you must use. Getting this wrong doesn't just create messy books — it puts you in violation of the Law on Accounting.

The Two Systems

Single-entry bookkeeping (vienkāršais ieraksts) records each transaction once: money in, money out. You maintain a cash book and an income/expense register. There is no balance sheet, no chart of accounts, and no requirement to track assets and liabilities separately. It is essentially a structured list of financial events.

Double-entry bookkeeping (divkāršais ieraksts) records every transaction twice — as a debit in one account and a credit in another. This creates a self-balancing system where total debits always equal total credits. The output: a full balance sheet, income statement, and the ability to generate detailed financial reports.

The practical difference is substantial. Single-entry tells you how much cash came in and went out. Double-entry tells you that — plus what you own, what you owe, what's owed to you, and how those figures changed over any period. It is more work, but it produces a fundamentally more complete picture.

Who Can Use Single-Entry

Single-entry bookkeeping is permitted only for:

• Sole traders (individuālais komersants) whose annual revenue does not exceed the threshold set by the Law on Accounting
• Micro-enterprises operating under the micro-enterprise tax regime
• Certain individual economic activity performers (self-employed persons)

The revenue threshold matters. Once a sole trader's annual revenue exceeds the legal limit, they must transition to double-entry, even without changing their legal structure.

Who Must Use Double-Entry

Every SIA (limited liability company) in Latvia, regardless of size, revenue, or number of transactions. There are no exceptions. A SIA with one shareholder, no employees, and EUR 500 in annual revenue still requires double-entry bookkeeping.

This surprises many founders who register a SIA thinking they can maintain a simple cash ledger. They cannot. From the day of registration, the company must maintain a chart of accounts, a general ledger, and produce annual financial statements including a balance sheet and an income statement.

Other entities requiring double-entry: AS (joint-stock companies), cooperatives, associations and foundations exceeding certain size thresholds, branches of foreign companies, and any entity whose annual report must be audited.

The Transition Challenge

Businesses that start with single-entry and later need to switch (because they grow, change legal form, or exceed thresholds) face a non-trivial transition. You cannot simply switch starting January 1 — you need an opening balance sheet that accurately reflects your financial position at the transition date. This requires:

• Inventory of all assets and their values
• List of all receivables and payables
• Bank account reconciliation
• Valuation of any fixed assets

In our experience, transitions attempted without professional help typically take 2-3 times longer than expected and produce errors that surface during the next audit. If you anticipate growth, consider starting with double-entry from day one — the incremental cost is modest, and it eliminates the transition entirely.

---

Transitioning to Double-Entry? We Handle the Migration.

Moving from single-entry to double-entry bookkeeping mid-year is a project most business owners underestimate. We calculate opening balances, configure your software, and ensure continuity in your records so the transition does not create gaps that surface during your next annual report.

Plan your bookkeeping transition →