Accounting vs. Bookkeeping

The difference between bookkeeping and accounting In a company there are many facets to the financial activities. Bookkeeping…

The difference between bookkeeping and accounting

In a company there are many facets to the financial activities. Bookkeeping and accounting are two different ways of handling the company’s accounts, even though many people think they refer to the same duties. Bookkeeping can be defined as the day to day activities of recording the income and the expenditures that occur. Accounting is a much broader term and refers to the analysis of the overall financial activities and the preparation of financial accounts. Both are essential to ensure that a business is being properly managed and is financially secure.

What is bookkeeping?

A bookkeeper records the financial activity of a company on a day-to-day basis. This includes the total sales, purchases, income and expenses. The name comes from the fact that this work was done manually with the records kept in ledgers, but today there is accounting software that makes this work so much easier. The purpose of bookkeeping is to keep the management and the owners informed about the financial health of the company.

There is still paper work involved in bookkeeping in books such as receipt books, day books, cashbook and a checkbook, as well as others depending on the type of business that is carried out. When a bookkeeper records an item in the daybook, that item also has to be recorded in the ledger. There are two types of bookkeeping – single entry and double entry. In single entry, a transaction is either a debit or a credit and is recorded in the appropriate column on the same account. In double entries there are two recordings of each one. A credit is placed in the credit ledger and a debit is placed in the debit ledger.

What is accounting?

The recording, reporting, and analysis of the financial activity in an organized manner fall under the heading of accounting. It also includes preparing financial statements and reports about the assets and liabilities. Some of the other duties of an accountant include preparing monthly statements and filing annual income tax returns. The preparation of budgets and loan proposals are also part of this department.

The language of business is one way to explain what accounting is because an accountant has to interpret all the numbers of income and expenditure and report to management on a regular basis. There are two types of accounting – management and financial. In management accounting, the managers of all the different branches must be informed about activities. In financial accounting, lenders, owners, and stakeholders are the ones who have to kept informed. Therefore, in management accounting, reports have to be sent to the insiders and in financial accounting, reports have to be sent to outsiders.

The difference between bookkeeping and accounting

Although bookkeeping and accounting deal with the finances of a company, bookkeeping involves keeping the intricate records of the financial activities and accounting involves analyzing the records kept by the bookkeepers in order to prepare reports. Bookkeeping is the recording of the daily activity, but accounting has to find the reasons for the various activities and justify them. An individual usually does the bookkeeping but there may be many people in an accounting department. Both are essential in the world of business.


Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts