Bookkeeping vs Accounting | The Battle of Two Business Terms

Accounting and bookkeeping sound similar for an unacquainted person. As both work with financial data and demand basic accounting skills. Meanwhile, these terms are different from each other and have their own features.

Do you know the difference?

Don’t worry if you don’t know.

In this blog, we will tell you all the similarities and differences of Accounting vs bookkeeping.
Accounting deals with the interpretation, classification, analysis, report, and summarization of financial data. However, bookkeeping aims to maintain a record of the financial transaction of a company.

Both play a vital role in the business organization. Let’s start with the definition of bookkeeping and accounting.

Bookkeeping

Bookkeeping is considered as the root of accounting. It is the step-by-step procedure to record and categorize an organization’s monetary activities. These records help the business owners and management in making effective financial decisions.
One can determine the achievements of a company with this information. Because this data is reliable and accurate.

It  involves

• Recognize the economic activities/transactions.
• Track these transactions.
• Create a ledger account.
• Produce a trial balance

It is responsible for the following tasks-

Document of income and expenses

It records the income and expenses of any organization. Such as office furniture, rent, transport charges etc.

Reckoning and making payments

It constructs the accounts and makes all the payments.

Make the comparison of balances and bank transactions

It is responsible for the comparison of balances and bank statements in your books. And check if they are matching or not. If they are not matching. They adjust them and make bank reconciliation transactions to record these disparities.

Trace accounts payable and receivable

It tracks all the money you own and owe for your business operations. Bookkeepers ensure that you pay your accounts within the time limit.

Support the general ledger

It uses the double-entry accounting system and stores all the economic transactions of a company. It balances the debit and credit in your account.

Accounting

In any organization, it is the structured way to record, determine, and present economic practices.
It helps the stakeholders to evaluate the financial status of a company. It assists the organization/business make short and long-term decisions. And forward its reliability to the market.
Accounting is known as the language of business. The primary purpose of accounting is to present the economic statements to the users. Such as investors, creditors, employees, and the government in an apparently clear way.

It involves

constructing monetary statements

In order to present you the more detailed view of your business an accountant prepare the financial statements such as-

Balance Sheets

At the end of the financial year, it is a clear picture of your business operations. In balance sheets, we apply the equation of-
Assets= Equity-Liabilities

Income Declaration

In a time duration, it is the record of your income and expenses.

Cash Flow statements

In the period, it is the record of inflow and outflow of your cash.

Study journals and ledger entries

An accountant ensures any statements or activity that have not been recorded.

Tax Suggestions

An accountant gives the tax suggestions and accomplishes the job of tax filing.

Serve financial advice

Accounting enables the accountants to give financial advice to the management. And enable them to understand the impacts of a business’s monetary decisions.

Also Read

• Top 7 Interesting uses of accounting
• Quick Guide on What is the Purpose of Accounting for Students
• What are the Key Importance of Accounting in The World?

Similarities of Accounting vs Bookkeeping

Despite differences, these terms also share some similarities.

• Both handle the financial data of any organization.
• Both are dedicated to enhancing the financial status of the company.
• They share some common features in small businesses. Because of software for bookkeeping that also accomplishes economic transactions.
• Both demand knowledge of accounting.
• Both are tax consent.

Differences of Accounting vs Bookkeeping

Both are regarded as one profession by the people because they also share some common features. Here we will present some differences in accounting. And bookkeeping to bring out this misconception.

Let’s discuss the major differences between accounting and bookkeeping.

Parameters	Bookkeeping	Accounting
Definition	Bookkeeping mainly focuses on recognizing, calculating and recording the company’s monetary statements.	Accounting aims to summarize, explain and convey the economic transactions. And segregate  them in the ledger account.
Decision	Business owner and management team can not rely on the data given by bookkeeping in decision making.	Accounting data is reliable and management depends on this data for making the decisions.
Goal	The goal of Bookkeeping is to keep the appropriate and structured record of monetary transactions.	The goal of the accounting is to measure the financial status of the organization and convey the valuable information to the owner.
Economic statements	Bookkeeping is not responsible for preparing financial statements.	Accounting includes the preparation of financial statements as its operations.
Requirement of skills	It does not demand any specific skill but basic accounting skills.	It demands a proper skill set because accountants need to extract valuable information from complex and analytical data.
Investigation	No need for any investigation/analysis in bookkeeping.	In Accounting, accountants use the information of bookkeeping to study. And explain the data, then add them into reports.
Types	Two types of bookkeeping- single entry, double entry.	There are various branches of accounting such as financial accounting, cost accounting, auditing etc.
Role of bookkeepers and accountants	Bookkeepers work under the supervision of an accountant. And are needed for the accurate calculations.	Accountants are experienced and well qualified. Accountants are hired for the assistance of effective decision making.

Conclusion

In conclusion, although accounting and bookkeeping share some similarities. They are two separate professions. This blog explained to you the definition, similarities. And differences of accounting vs bookkeeping. I hope now you understand what features they share and how they differ. 

It would help you to choose which one suits you for your business operations. If the businesses have a clear idea of their budget and finance they can do better. Accountants and bookkeepers perform different tasks to make a business renowned. If you hire both for your business it means you are getting effective advice from time to time. If you are still struggling to understand it then take the best bookkeeping assignment help from our experts.

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