Many use the terms bookkeeping and accounting interchangeably, but the fact is that the first is the first step to the second step. That is, Bookkeeping is the stepping stone to Bookkeeping. When it comes to the scope of these two processes, Bookkeeping is much broader and more analytical than Bookkeeping. Accounting is only a part of accounting, which creates an accounting basis.
While accounting emphasizes recording transactions, the work is clerical in nature. On the other hand, accounting summarizes recorded transactions, which requires a high level of subject knowledge, analytical skills, and conceptual understanding. Take a look at the article, which explains the difference between accounting and tabular accounting.
|Basis of comparison||Accounting||Bookkeeping|
|Senses||Accounting is the activity of systematically recording the financial transactions of the company.||Bookkeeping is an orderly recording and reporting of the financial affairs of an organization for a given period.|
|What is that?||It is the subset of accounting.||It is considered the language of business.|
|Decision making||Based on the accounting records, decisions cannot be made.||Decisions can be made on the basis of accounting records.|
|Preparation of financial statements||Not done in accounting process||Part of the accounting process|
|Tools||Journal and Ledgers||Balance sheet, income statement and cash flow statement|
|Methods / Subfields||Single-entry accounting system and double-entry accounting system||Financial Accounting, Cost Accounting, Management Accounting, Human Resources Accounting, Social Responsibility Accounting.|
|Determination of financial position||Accounting does not reflect the financial condition of an organization.||The accounting clearly shows the financial position of the entity.|
Definition of Accounting
The process of keeping complete and systematic records of an organization’s monetary transactions by the accountant is known as Bookkeeping. It consists of keeping complete documentation of each financial transaction of the entity to constitute a basis for the accounting process. The purpose of accounting is to provide a true picture of income and expenditure at the end of the accounting period.
Bookkeeping is done by the accountant responsible for recording day-to-day business transactions such as cash inflows and outflows, goods sold or purchased on credit, expenses incurred, etc., in an orderly manner. The accounting clerk records the transactions in the daily books, such as purchases, sales, purchase returns, customer return, cash books, journals, etc., and records them in the relevant general ledger after the trial balance is prepared. There are two accounting methods:
- Single Entry System in Accounting
- Double-Entry System in Accounting
Definition of Bookkeeping
Accounting is simply a business language that provides information about the organization’s financial status. It is a complete procedure that starts from the registration of transactions and ends with presenting financial statements at the end of the financial year.
In accounting, the monetary transactions of an organization are identified and systematically recorded and then grouped together. That is, transactions of similar nature are classified in a common group. Then they are summarized so that they can be presented to users of the financial statement. . After this in-depth analysis of the financial statements, we can interpret the conclusions and finally communicate the results of the financial statements to the interested parties.
The purpose of accounting is to provide a true and fair view of financial statements to its users, namely investors, employees, creditors, suppliers, managers, governments, and the general public. They are easily understandable for a given financial account. Year. Financial statements are prepared with the help of accounting statements on the entity’s wealth, profits, and financial position. The branches of accounting are:
- Financial Accounting
- Cost accounting
- Management accounting
- Human Resource Accounting
- Social Responsibility Accounting
Fundamental differences between Bookkeeping and Bookkeeping
The points below are important so far as the difference between Bookkeeping and accountancy is concerned:
Accounting maintains proper records of an entity’s financial transactions. Accounting is the recording, measuring, aggregating, summarizing, evaluating, and reporting of the entity’s transactions in monetary terms.
The accounting task is. Performed by an accountant while the accountant performs the accounting task.
Financial statements are part of the accounting process but not part of the accounting process.
Accounting documents are. Taken as the basis for making a management decision. Unlike accounting documents, in which decision-making is difficult.
Bookkeeping is the first step in Bookkeeping.
The accounting does not disclose the correct financial situation. However, for accounting purposes, accounting helps users give a true picture of an organization’s financial status and profitability.