Let us know, as to, what is the difference between Accounting and Bookkeeping?. We will discuss the top 10 major differences between Accounting and Bookkeeping as well.
Accounting is the art of recording and reporting financial transactions in the books of accounts using financial statements. The main objective is to maintain a systematic record of business transactions and to evaluate the financial performance and position for the year. Thereby, communicating the results to the users of financial statements.
Bookkeeping is the art of recording business transactions in the books of accounts in a systematic and logical manner. The main functions of bookkeeping involve collecting and producing source documents, recording business transactions in books of accounts, maintaining books of accounts, to complete the payroll.
However, Bookkeeping does not involve the preparation and presentation of financial statements, analysis of financial statements and decision making.
The top 10 differences between Accounting and Bookkeeping:
Thus, Accounting and Bookkeeping are not one and the same. There are differences between them. They are differentiated on basis of the below-listed terms.
1. Meaning and Definition:
Bookkeeping is the art of recording business transactions in the books of accounts in a systematic and logical manner.
Whereas Accounting is the art of recording, classifying, interpreting, communicating financial affairs through Financial statements.
2. Objective:
The main objective of Accounting is to maintain a systematic record of business transactions and to evaluate the financial performance and position for the year. Thereby, communicating the results to the users of financial statements.
Whereas Bookkeeping objectives involve recording the business transactions, knowing the effect of recorded transactions on financial statements, maintaining books of accounts, prevention and detection of frauds & errors.
3.Scope:
Bookkeeping is a part of Accounting. It is the recording phase and it has no branches as such. Its scope is narrowed down.
Whereas Accounting has a much wider scope. It has a variety of branches such as financial accounting, cost and management accounting, social responsibility accounting.It is the language of business.
4.Decision making:
On the basis of Bookkeeping records, no managerial decisions can be taken as it has a much-limited scope with limited financial information available in the records.
Whereas Accounting records help in taking the right managerial decisions at the right time as it provides useful, reliable and complete information.
5.Preparation and presentation of financial statements:
The preparation and presentation of financial statements is not a part of Bookkeeping. Thus the preparation of financial statements is not a part of the bookkeeping process.
Whereas preparation and presentation of financial statements is a part of Accounting, Thus it helps in the preparation of financial statements and analysis of financial statements and to take managerial decisions.
6. Methods and Types involved:
Bookkeeping has two methods to record the business transactions such as the Double Entry system and the Single Entry system.
Whereas Accounting has several types or branches such as financial accounting, cost and management accounting, social responsibility & forensic accounting
7. Books of Accounts or Documents or Reports involved:
The bookkeeping part is the recording phase which involves a systematic record of business transactions in Journal, Ledger as well. This involves Journal and Ledgers to record transactions.
Whereas the Accounting part involves Trading and Profit&loss account, Balance sheet, Cash flow statement, Notes to accounts.
8. Ascertaining Financial performance and financial position:
Accounting helps in determining the financial performance using profit & loss account. It helps to know the financial position of the business enterprise using a balance sheet and financial performance using profit&loss statement as well
Whereas Bookkeeping does not facilitate in knowing the financial statement's position. This involves mostly recording transactions task.
9. Education & Skills required:
Bookkeeping work does not require the bookkeeper to have specialised education, certification and skills. As this work is often clerical in nature and does not involve analysing or decision making.
Whereas Accounting work demands a good qualification, certification, sound knowledge and skills to be called professional.
10. Analysis:
The process of bookkeeping does not require analysis as this is mostly clerical work. The work is repetitive and clerical in nature and thus does not demands any analysis.
Whereas Accounting uses Bookkeeping information to analyse and interpret the financial data and then it compiles it into financial reports as well.
Conclusion:
Thus now we can conclude, as to, what is the difference between Accounting and Bookkeeping? What are the key differences between them. Thus Accounting is far superior to Bookkeeping in many aspects as seen above.
Related blogs:
What is Journal? Its features, types, Objectives and uses
What are Financial Statements? Its features, types, uses
What is Income Statement (Profit and loss a/c)?
What is Balance Sheet (Position Statement)?
What is Bookkeeping? Its features, objectives, uses?
What are Subsidiary Books? Its features, types, objectives, uses
What is Single Entry System? Its features, types, objectives, uses
What is Double Entry System? Its features, objectives, uses
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