Distinguish between book-keeping and accounting.
Answers
Answer:
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Explanation:
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.
What is Bookkeeping?
Bookkeeping is primarily associated with recording of the data related to business transactions in a systematic manner. The transactions, thus, need to be identified, accepted, classified and recorded. This should be done in such a way that the recorded transactions can be recovered and presented in the form of financial statements and other reports.
According to Carter,
“Bookkeeping is an art and science of correctly recording in books of accounts all those business transactions that result in transfer of money or money’s worth.”
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Nature of Bookkeeping/Role of a Bookkeeper
Bookkeeping as a task is clerical in nature which includes:
Collecting financial data associated with the business
Identifying various transactions that are economic in nature
Measuring such transactions in terms of financial units, that is, money
Recording such economic transactions in order of their occurrence
Classifying each transaction into various heads such as sales, purchases etc
Preparing Trial Balance to check for the accuracy of the recorded amounts
What is Accounting?
Business owners use accounting to record the financial transactions undertaken over the course of business. The ultimate goal of undertaking business activity is to generate profits. Thus, a business owner needs to know about the financial soundness of his business. In other words, he would want to know that the various business transactions undertaken would result into profits or losses during the course of business. This is where accounting helps a business owner in understanding the impact of various transactions on its business.
According to The American Institute of Certified Public Accountants (AICPA), Accounting is defined as:
“the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of such information.”
Book - keeping :
Book keeping is the recording of financial transaction , and is part of the process of accounting in business transaction . Transaction includes purchases , sales , receipts and payments by an individual person .
Accounting :
Accounting is a measurement ,
processing , and a communication of
financial and non financial information
about economic entities such as
business and corporation.