Bookkeeping Vs Accounting
Both bookkeeping and accounting are used interchangeably in the financial world, however, there is a notable difference between bookkeeping and accounting. Bookkeeping is a part of accounting whereas accounting itself is a wider concept.
Definition of Bookkeeping – Literally, it means the activity of keeping (or maintaining) financial books, i.e. recording financial transactions & events. The books referred to, in this context, are the books of accounts. This involves extensive data input. Few activities under book-keeping are;
- The input of invoice and voucher details into ERP systems.
- Receiving and recording payments by customers.
- Making and recording payments to vendors.
- Efficiently processing payroll information, etc.
Definition of Accounting – Accounting, on the other hand, is the process which includes recording, classifying, summarizing and interpreting the financial information of an economic unit. The economic unit is considered as a separate legal entity. Accounting information is widely used by various types of parties for several different reasons. Few activities under accounting are;
- Preparation of a trial balance, ledger accounts, etc.
- Preparation of financial statements.
- Analysis of financial data.
Related Topic – Difference between Financial and Cost Accounting
Difference between Bookkeeping and Accounting (Table)
|1. Bookkeeping is mainly related to the process of identifying, measuring, recording and classifying financial transactions.||1. Accounting is the process of summarizing, interpreting and communicating financial transactions which were classified in the ledger account as a part of bookkeeping.|
|2. It is the beginning stage and acts as a base for accounting.||2. Accounting begins where bookkeeping ends.|
|3. Management can not make decisions based on bookkeeping.||3. Management can make decisions based on accounting.|
|4. The objective of bookkeeping is to keep proper and systematic records of financial transactions.||4. The objective of accounting is to ascertain the financial position and further communicate the information to the relevant parties.|
|5. Financial statements are not prepared during bookkeeping.||5. Financial statements are prepared on the basis of records obtained through bookkeeping.|
|6. Bookkeeping doesn’t require any special skills as it is mechanical in nature.||6. Accounting, on the other side, requires special skills due to its analytical and somewhat complex nature.|
For Accounting Practice