Difference between Bookkeeping and Accounting
Many utilize the bookkeeping and accounting terms reciprocally, yet the matter of the fact is that bookkeeping is a part of accounting. Moreover, accounting is a lot more analytical and extensive than bookkeeping. Bookkeeping helps in forming the base for accounting as it is just a part of accounting.
While bookkeeping, on the other hand, is related to updating the financial transaction in the books of accounts. Through this, we can conclude that the job of a bookkeeper is clerical in nature. On the contrary, accounting is related to the classifying, analyzing and summarizing the recorded monetary transaction. Moreover, accounting needs specialized knowledge of the subject, analytical skill, conceptual understanding and so on. Take a look at the article, which shows the difference between bookkeeping and accounting:
Meaning of Bookkeeping
The procedure of complete and efficient record keeping of the transaction of an association by the bookkeeper is called bookkeeping. It helps in recording each and every transaction of the business so as to form the base for accounting. Moreover, bookkeeping helps in finding the true and fair picture of profit and loss statement at the end of the accounting period.
The bookkeeper is the one who looks after that each financial transaction of the business is recorded regularly and systematically. Some of the common examples of day to day transactions are goods sold, goods purchased, goods returned and so forth. The bookkeeper records the transactions in the books of accounts like sales, sales return, purchase, purchase return, journal and so forth. And posts them in the concerned ledger, after that transferred in the trial balance. There are two ways to update the books of accounts and they are:
- Single Entry System
- Double Entry System
Meaning of Accounting
Accounting is also known as the business language that provides information regarding the financial status of the business. Accounting begins with the financial transaction recording and ends on financial statement reporting to the users at the end of the year to give a true and fair view of the business.
In accounting the financial transaction of an association are recognized and periodically recorded, after that they are classified and grouped. Thereafter, such classified transactions are summarized in a manner that can be presented to the existing user of the company. After this, the financial statements are intensively analyzed and ends with providing such reports to the prospective users. The different types of accounting are
- Management Accounting
- Financial Accounting
- Cost Accounting
- Human Resource Accounting
- Social Responsibility Accounting
Difference between Accounting and Bookkeeping
Here are the differences between accounting and bookkeeping:
Parameters | ACCOUNTING | BOOKKEEPING |
|---|---|---|
Meaning | Accounting is recording, classifying, summarizing and classifying of the financial transaction of business. | Under bookkeeping company’s financial transaction are recorded in a systemized manner. |
What is it? | Business language. | Part of accounting. |
Decision Making | The user can make decisions on the basis of accounting | The user cannot make decisions on the basis of bookkeeping |
Preparation of Financial Statements | Financial statements are prepared in accounting. | As bookkeeping is the part of accounting, it does not deal with the financial statement preparation. |
Tools | Profit and loss statement, Balance Sheet and Cash Flow Statement | Journal and Ledgers |
Methods or Types |
|
|
Financial Position | Through accounting, the user can easily determine the financial position of the entity. | The financial position of the company cannot be determined through bookkeeping. |
