What is book keeping and how does it differ from accounting
Answers
Bookkeeping process consists of the following steps:
Identifying a financial transaction
Recording a financial transaction
Preparing a ledger account
Preparing trial balance
Definition Bookkeeping deals with identifying and recording financial transactions only Accounting refers to the process of summarizing, interpreting and communicating the financial data of an organisation.
Basis of Accounting It is the basis of accounting It is the language of business
Preparation of Financial Statement Not done in the case of bookkeeping Financial statements are a part of the accounting process
Analysis No analysis is required in the bookkeeping Accounting analyzes the data and creates insights for the business
Tools It involves journals and ledgers It involves balance sheet, profit & loss account, cash flow statement
Persons Involved The person concerned with bookkeeping is known as a bookkeeper The person concerned with accounting is known as an accountant
Determining Financial Position Bookkeeping does not show the financial position of a business Accounting helps in showing a clear picture of the financial position of a business
Level of Learning No high-level learning required High-level learning required for understanding and analyzing accounting concepts.