Though Bookkeeping and Accounting seems
to be similar in nature, they are different in many ways. Bookkeeping and
Accounting are part of any business transaction. All the business
transactions start with Bookkeeping of transactions and end with Accounting of
transactions. Let’s see the differences between bookkeeping and
accounting:
·
Bookkeeping
is the first stage in Accounting. It is the process of recording
transactions involving cash, bank, sales, purchase, etc. Accounting
process is a broad one which involves classifying and summarizing of the
business transactions.
o
For example, goods sold to Sam, this transaction is recorded as
journal entry is called bookkeeping. Classifying the two accounts involved in
this transactions is Accounting, sale of goods is revenue and Sam is a debtor
for the business. Revenue is shown in
Profit & Loss Account and Sam as a debtor is shown in the Balance Sheet.
·
Bookkeeping
doesn't need any special knowledge or skill. Any clerk can record
transactions in a predefined format. Accounting needs the knowledge of
classifying, summarizing and preparation of various financial statements.
An Accountant needs to give reports according to the needs of Management. He
also needs to make various adjustments in order to made financial statements in
the prescribed format as required by Acts and Laws of different countries.
o
Based on the above example, goods sold to Sam, a clerk can be
taught what to be debited or credited and the modern ERP systems are good
enough to take of the recording these transactions in a simple way. But Accounting helps to report to the
management how much is sales is made, how much is the outstanding on a
particular date.
·
Bookkeeping
tells you only the number of transactions recorded in a particular period. But
Accounting gives you the true picture of the financial position of
business.
·
Bookkeeping
is merely journal records of transactions. Accounting has many financial
statements like Profit & Loss Account, Balance Sheet, Cash Flow Statement,
Funds Flow Statement, etc.
·
Bookkeeping
needs only basic qualification to record transactions. Accounting needs
professional qualification like Chartered Accountants, Cost Accountants and
degrees in commerce and accounts.
·
Bookkeeping
has only recording department. But Accounting has different departments
like Financial Accounting, Management Accounting, Tax Accounting, and
Cost Accounting.
o
For example, the
data entry team can take care of recording the transactions, whereas cost
departments helps for costing the goods and services.
