What makes a difference between bookkeeping and accounting?
Accounting and bookkeeping both are a fundamental business function for all business. Many people use the term accounting and bookkeeping same meaning but true is that bookkeeping is the stepping stone of accounting. Bookkeeping is a biased of accounting also a part of accounting. Accounting is more elaborate and analytical than bookkeeping. Interpreting, classifying, analyzing, reporting, and summarizing financial data is recorded in accounting and financial transaction is recorded in bookkeeping. Difference between bookkeeping and accounting is depth knowledge for accounting reader and if you make it then click here.
Although bookkeeping is recording transactions, so the task is critical nature. Similarly, accounting is a process of summarizing the transactions which require high-level knowledge, conceptual understanding, analytical, expertise, and skills. Now we may explain difference between bookkeeping and accounting tabular chart which is given below;
- 1 Meaning:
- 2 What is it?
- 3 Decision making:
- 4 Financial statement presentation:
- 5 Use of tools:
- 6 Use of methods:
- 7 The condition of financial position?
- 8 Define bookkeeping vs. accounting:
- Bookkeeping is a systematic manner of recording Process which is recorded in financial transactions of the company.
- Accounting is a process of recording and reporting for organizations of financial transactions for a particular period.
What is it?
- Bookkeeping is a subset of accounting.
- It is a language of business.
- In the recording system bookkeeping cannot take a decision
- The way of the process of recording system accounting is taken a prospective decision.
Financial statement presentation:
- Bookkeeping has no financial statement presentation process.
- Financial statement presentation is a part of accounting.
Use of tools:
- Journal entries and ledger accounts
- Profit and loss accounts, Balance sheet and cash flow statement.
Use of methods:
- Double and single entries system are used as a method.
- Financial accounting, cost accounting, human resource accounting, management accounting and social responsibility accounting
The condition of financial position?
- Bookkeeping does not show financial position.
- Accounting reflects the financial position of the organizations.
Define bookkeeping vs. accounting:
Bookkeeping is a systematic and complete recording process which is keeping monetary transaction of an organization. In this process the activity of financial process keeping full documentation for every single financial transaction. The purpose of bookkeeping is to expose the correct picture of income and expenses as a statement at the end of the accounting period.
The recording system is performed by a bookkeeper who is the liable person for the bookkeeping task and recording the business transactions of day to day such as incoming and outgoing cash, cost of goods sold, purchase on credit, inventory, and expenses of transactions and so on. The accountant keeping the transaction in day books like as sales, purchase, sales return, purchase return, journal entries, ledger books, cash books, etc. and then the entries are recorded in ledger accounts and the ledger accounts balance transfer to prepare a trial balance. the bookkeepers is followed two methods which are given below;
- Single Entry Bookkeeping and
- Double Entry Bookkeeping.
In accounting, the transactions of organizations are recorded as a systematic process which is recorded as a group and the group is consist of similar kind of transactions, then it will be summarized for the presentations of the users of the financial statement. After that the financial report thoroughly analysis and when it will be done it will help who the interested users of the financial report.
In fact, accounting is a business language which is provided information about the financial statement of an organization. it is the compact procedure in the beginning of the recording of the transaction and the conclusion is reporting of the financial statement at the end of the accounting period.
Similarly, the purpose of the accounting is to provide the correct financial report of its real users which are investors of the organizations, employees, suppliers, creditors, labor union, employee’s managers, government agencies and the general public who are the users of the reports. The statement prepares of an accountant who evaluates the assets, net profit or loss and financial position of the business. The divisions of accounting are;
- Management Accounting
- Financial Accounting
- Cost Accounting
- Social Responsible Accounting
- Human Resource Accounting
Now we can discuss the key differences which are discussed in as follows;
Basic differences between bookkeeping and accounting:
- Accounting is a system of recording, measuring, summarizing which is evaluated and reporting the transactions of the entity.
Bookkeeping is a proper system of recording of the financial statement of organizations.
- An Accountant does the accounting task and the bookkeepers prepare the bookkeeping.
- Bookkeeping is the first step and fundamental task of accounting. Accounting is more widely spread and elaborates that the bookkeeping task.
- Accounting records are taken as a managerial decision. On the other hand, bookkeeping is not a medium of taking the decision.
- Accounting reflects the real picture of financial statements in its users. Similarly, bookkeeping is not shown real financial reporting of its entity.