- October 5, 2019
- Posted by: Luna
- Category: Uncategorized
In the Financial World Bookkeeping & Accounting are mostly used for business purposes. Bookkeeping is a part of accounting where accounting is the main concept in Itself. They both use the terms of interchangeably, but the fact is the former is the first step to the latter, i.e. bookkeeping is the stepping stone of accounting. As far as the scope is of these two processes is concerned, Finance is much wider and more analytical than bookkeeping. Bookkeeping is only a part of accounting, which creates a base for accounting. While bookkeeping stresses on the recording of transactions and so the work is clerical in nature. On the other hand, accounting is all about summarizing the recorded transactions, which require a high level of subject knowledge, expertise, analytical skills, conceptual understanding and so forth.
Content: Bookkeeping Vs Accounting
- Comparison Chart
- Key Differences
|Basis for Comparision||BOOKKEEPING||ACCOUNTING|
|Meaning||Bookkeeping is mainly related to the process of identity measuring; recording and classifying the financial transaction||Accounting is the process of summarizing, interpreting & communicating financial transactions that were classified in the ledger account as a part of bookkeeping.|
|What is it?||It is the subset of Accounting||It is regarded as the language of business|
|Decision Making||records decisions cannot be taken||A decision can be taken on the basis of accounting records|
|Preparation of Financial Statement||Not done in the bookkeeping process||Part of Accounting Process|
|Tools||Journal and ledger||Balance sheet, & Cash Flow statement Profit & Loss Account|
|Methods||Single Entry System of bookkeeping & Double Entry System of bookkeeping||Financial Accounting, Cost Accounting, Management Accounting|
|Determination of Financial Position||Bookkeeping did not reflect the financial position of an organization||Accounting shows the financial position of the entity|
The activity of keeping financial books, i.e. recording financial transactions & events. The books referred to, in this context, books of accounts. This involves extensive data input. Few activities under book-keeping are;
- The input of invoice & voucher information into ERP systems.
- Receiving and recording payments by customers.
- Making and recording payments to vendors.
- Efficiently processing payroll information, etc.
Accounting, on the other hand, is the process that includes recording, classifying, summarizing and interpreting the financial information of an economic unit. The economic unit is considered as a private legal entity. Accounting detail is widely used by various types of parties for several different reasons. Few activities under accounting are;
- Preparation of a trial balance, ledger accounts, etc.
- Preparation of financial statements.
- Analysis of financial data.
- Bookkeeping is the keeping of the financial transaction of an entity. And Accounting is recording, measuring, grouping, summarizing, evaluating & reporting of transactions of the entity which are in monetary terms.
- The Bookkeeping is performed by a bookkeeper whereas the accountant performs the task of accounting
- Financial Statement forms a part of the accounting process but it’s not the bookkeeping process.
- Accounting records are taken as a base for taking managerial decisions unlike bookkeeping records, in which decision making is difficult.
- Bookkeeping is the first step to Accounting.
Many use the terms bookkeeping and accounting interchangeably, but the fact is the former is the first step to the latter, i.e. bookkeeping is the stepping stone of accounting. As far as the scope is of these two processes is concerned, Accounting is much wider and more analytical than bookkeeping. Bookkeeping is only a part of accounting, which creates a base for accounting. Bookkeeping works as a platform to Accounting procedure as bookkeeping is the initial stage of inception of accounting. Hence, Bookkeeping is an inseparable part of Accounting. It acts as a base for Accounting & so if the bookkeeping of records is done properly, then it is supposed that accounting will also be perfect and vice versa.