Question

distinction between book keeping and accounting

Answer 1

TOP 8 DIFFERENCES BETWEEN BOOKKEEPING AND ACCOUNTING



Bookkeeping and accounting are two functions which are extremely important for every business organization. In the simplest of terms, bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data.

Bookkeeping and accounting may appear to be the same profession to an untrained eye. This is because both accounting and bookkeeping deal with financial data, require basic accounting knowledge, and classify and generate reports using the financial transactions. At the same time, both these processes are inherently different and have their own sets of advantages. Read this article to understand the major differences between bookkeeping and accounting.

Bookkeeping vs Accounting - 8 Major Differences

A major misconception regarding bookkeeping vs. accounting is that both are considered to be one profession. Though they seem to be very similar, there are some striking differences between the two. To resolve this confusion, we have listed down accounting vs bookkeeping differences here -

Definition

Bookkeeping

Bookkeeping is mainly related to identifying, measuring, and recording, financial transactions

Accounting

Accounting is the process of summarizing, interpreting, and communicating financial transactions which were classified in the ledger account

Decision Making

Bookkeeping

Management can't take a decision based on the data provided by bookkeeping

Accounting

Depending on the data provided by the accountants, the management can take critical business decisions

Objective

Bookkeeping

The objective of bookkeeping is to keep the records of all financial transactions proper and systematic

Accounting

The objective of accounting is to gauge the financial situation and further communicate the information to the relevant authorities

Preparation of Financial Statements

Bookkeeping

Financial statements are not prepared as a part of this process

Accounting

Financial statements are prepared during the accounting process

Skills Required

Bookkeeping

Bookkeeping doesn't require any special skill sets

Accounting

Accounting requires special skills due to its analytical and complex nature

Analysis

Bookkeeping

The process of bookkeeping does not require any analysis

Accounting

Accounting uses bookkeeping information to analyze and interpret the data and then compiles it into reports

Types

Bookkeeping

Basically there are two types of bookkeeping - Single entry and double entry bookkeeping

Accounting

The accounting department does preparations of a company's budgets and plans loan proposals

Bookkeepers and Accountants

Bookkeeping

Bookkeepers are required to be accurate in their work and knowledgeable about financial topics. Bookkeepers work is usually overseen by an accountant

Accounting

Accountants with sufficient experience and education can obtain the title of Certified Public Accountant (CPA)