Similarities and Differences between Accounting and Bookkeeping
Many a times, bookkeeping is mistaken for accounting. Accounting is the systematic means of identifying, maintaining documents, classification, assessing and communicating financial information over a given amount of time so as to understand the losses and gains of a company whereas book keeping is a part of the procedure in accounting through record of financial transactions. Book keeping provides information essential for preparation of accounts. Both processes have their similarities and differences as outlined below.
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In the accounting and book keeping, records are extremely important. Book keeping requires daily noting down for easy accessibility when it comes to preparing accounts and accounting requires the records for preparation and analyzing of financial statements.
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From the daily transaction records, they are classified to Different novels i.e. bank book that is used to document the deposits and withdrawals made, buy book for the records of all purchases made on credit, money book used for the purpose of documenting all cash payments such as trade payables like trade payables and petty cash purchases and money receipts like trade receivables and cash sales and finally the earnings book by which non-cash earnings are recorded together with customer’s key details and afterwards transferred into the client’s account.
Accounting makes use of the income statement, balance sheets And even cash flow statements because its most important tools while in book keeping journals and ledgers are utilized.
Financial statement preparation
While book keeping does not require any preparation of Financial statements, accounting is largely the preparation of these financial statements such as balance sheets, profit and loss statement and cash flow statements.
The direction Isn’t involved in book keeping but they’ve a particular interest in accounting documents because it is useful in checking on the operation of an organization and making of future choices based on that information.
Whereas information provided by publication keepers cannot be Solely utilized to make conclusions, accounting data plays a significant part in making decision making in a company.
Publication keeper’s roles are largely to collect, document and Classify information relating to monetary transactions while accounting requires more skilled employees to translate and convey the consequences for decision making.
Accounting is a little complicated hence it requires particular skills while on the other hand accounting doesn’t require any particular skills because of its simple nature.
Accounting is classified into cost, management and financial accounting among other categories while book keeping is categorized into single entry and double entry.
A lot of people tend to confuse book keeping and accounting to be the same thing. However, since we have seen in this paper the two processes Share some common features and as well have their differences that differentiate one from the other.