Difference Between Bookkeeping and Accounting
What is BookKeeping
BookKeeping means a process in which recording, storing and retrieving a company’s financial transaction on the regular basis. The transaction comprises of an individual or a company’s sales, purchases, receipts, etc. BookKeeping is managed by BookKeepers.
In a Business, BookKeeping plays an important role because it gives all financial data a systematic order. It is also important for all the financial sources such as government, financial institutions and investors.
Bookkeeping methods are of two types; which are Single-Entry system of BookKeeping and Double-Entry system of Book Keeping.
Typical BookKeeping Duties
There are various duties of Bookkeeping:
- Processing a payroll system and maintain it.
- Preparing initial financial statement
- Processing invoices.
- Managing accounts payable and accounts receivable.
- Preparing and filing VAT returns.
- Processing receipts, payments and other financial transactions.
- Filling and document management
- Providing basic tax advice
- Posting Journal entries
Process of BookKeeping
The process of BookKeeping involves the following steps:
- Identifying and recording financial transactions.
- Posting all debits and credits of a venue accurately.
- Creating invoices.
- Preparing and maintaining general ledger accounts.
- Preparing and managing the trial balance.
What is Accounting
Accounting means a process of recording, analysis, interpretation, and summarization of a company’s financial data. Accounting verifies the record of BookKeeping and makes its financial report.
With the help of Accounting, investors and stakeholders can determine the financial position of a company. Accounting helps the company in making short- and long-term decisions and take a company’s credibility to the market.
The main purpose of accounting is to offer its users a clear and true view of the financial statements that comprise government, employees, creditors and investors. Accounting is also called the language of business.
There are various branches of Accounting:
- Cost Accounting
- Management Accounting
- Financial Accounting
- Social Responsibility Accounting
- Human Response Accounting
Typical Accounting Duties
There are various Accounting duties:
- Preparing to adjust entries
- Auditing
- Financial forecasting
- Analysis of business performance
- Financial management advice
- Tax strategy and tax planning
- Prepare business plans and cash flow forecasts
- Preparing financial statements and reports
- Completing income tax returns
- Organizing budgets
Process of Accounting
The process of Accounting involves the following points:
- Recording adjusting entries
- Formulating and analyzing financial statements
- Prepare ledger account and trial balance
- Assessing operational cost
- Completing tax returns
- Weighing the impact of decisions pertaining to finances.
Difference Between Bookkeeping and Financial Accounting
| Basis for Comparison | BookKeeping | Accounting |
|---|---|---|
| Meaning | BookKeeping means a process in which recording, storing and retrieving a company’s financial transaction on the regular basis. | Accounting means a process of recording, analysis, interpretation, and summarization of a company’s financial data. |
| Purpose | The purpose of bookkeeping is to maintain the records of each financial transactions fair and orderly. | The purpose of accounting is to assess the financial situation and inform the information to the concerned authorities. |
| Skills Required | There are no special skill sets required for BookKeeping. | Because of the analytical and complex nature of accounting, it requires some special skills. |
| Financial Statement | The financial statement is not a part of the Bookkeeping. | The financial statements are prepared through the accounting process. |
| Basis of Accounting | Bookkeeping is the basis of accounting. | Accounting is the language of business. |
| Analysis | The analysis is not needed for Bookkeeping. | Accounting analyses the data and provides company insights. |
| Determining Financial Position | With the help of the Bookkeeping, we cannot determine the business’ financial position. | With the help of Accounting, we can determine the business’ financial position. |
| Persons Involved | Bookkeeper is the person involved in the bookkeeping. | Accountant is the person involved in the accounting. |