Question

differentiate between book keeping and accountancy

Answer 1

both bookkeeping and accounting are used interchangeably in the financial world, there is a notable difference between bookkeeping and accounting. Bookkeeping is a part of accounting whereas accounting itself is a wider concept.

Here are some major differences between them:

Definition: Bookkeeping is mainly related to identifying, measuring, and recording financial transactions. Whereas, Accounting is the process of summarizing, interpreting, and communicating financial transactions which were classified in the ledger account.

Decision Making: Management can't take a decision based on the data provided by bookkeeping. Whereas, Depending on the data provided by the accountants, the management can take critical business decisions.

Objective: The objective of bookkeeping is to keep the records of all financial transactions proper and systematic. Whereas, The objective of accounting is to gauge the financial situation and further communicate the information to the relevant authorities.

Skills Required: Bookkeeping doesn't require any special skill sets, whereas, Accounting requires special skills due to its analytical and complex nature.

Analysis: The process of bookkeeping does not require any analysis, whereas, accounting uses bookkeeping information to analyze and interpret the data and then compiles it into reports.

Preparation of Financial Statements: Financial statements are not prepared as a part of this process, whereas, Financial statements are prepared during the accounting process.

Types: Basically there are two types of bookkeeping - Single entry and double entry bookkeeping, whereas, the accounting department does preparations of a company's budgets and plans loan proposals.