Difference between Bookkeeping and Accounting
Every business needs to have a bookkeeping and accounting process to prepare the financial records at the end of a year/quarter. In addition, bookkeeping and accounting help the business evaluate its worth and take future decisions.
In contrast to accounting, bookkeeping is not concerned with disclosing or evaluating company results.
Bookkeeping and Accounting
Bookkeeping and Accounting are two fundamental pillars that contribute to the effective legal and financial management of a company’s financial affairs. The former refers to the systematic maintenance of an organization’s records or books of account. However, the latter refers to the practice of measuring and recording all financial transactions during a fiscal year.
Most of the time these 2 terms are interchanged. Let’s look into the exact difference between the two.
What is Bookkeeping?
Bookkeeping is defined as the proper and methodical maintenance of accounting records. It is the science and art of systematically detecting and recording accounting transactions in the appropriate books of account. It is focused with the correct upkeep of the books, namely the Journal, Ledger, Cash Book, and other auxiliary books.
In contrast to accounting, bookkeeping is not concerned with disclosing or evaluating company results.
Bookkeepers are responsible for
- Recording sales and purchases.
- Managing accounts receivable and payable.
- reconciling bank statements
- Recording payroll transactions
The bookkeeping process consists of the following steps:
- Identifying a Financial Transaction
- Recording a financial transaction.
- Create a ledger account.
- Preparing trial balance.
What is Accounting?
Accounting is the practice of measuring and recording all financial transactions that occur throughout a fiscal year. It entails summarizing, assessing, and documenting the information. It assists in obtaining a clear picture of a company’s financial status by examining the value of its assets and liabilities.
Accounting is a discipline that is built on a variety of words, rules, principles, and standards that must be followed in order to gather the necessary information for decision-making.
Accounting has certain basic terms:
- Summarizing the information: During this process, all financial transactions are recorded and summarized in one spot.
- Analyzing the Data: After summarizing the data, various specialists analyze it.
- Interpreting the Data: Data interpretation occurs after data analysis is completed. In this phase, all of the information gathered in earlier steps is delivered.
- Communicating the information: After the successful completion of the above steps, the information which is required by the different investors and other business entities is communicated to them.
The Role of CPAs:
Certified Public Accountants (CPAs) are professionals with specialized training and expertise in accounting and financial management. They hold certifications granted by regulatory bodies and are authorized to offer a range of financial services. CPAs go through rigorous education, examination, and experience requirements to earn their credentials.
Aspect | Bookkeeping | Accounting |
Scope | Focuses on recording financial transactions. | Involves interpreting, analyzing, and summarizing data. |
Function | Primarily involves data entry and record-keeping. | Involves financial analysis, reporting, and decision-making. |
Timing | Ongoing process, records transactions as they occur. | Involves periodic reporting and analysis, typically at the end of a financial period. |
Skills Required | Attention to detail, proficiency in data entry. | Analytical skills, critical thinking, deeper understanding of financial principles. |
Scope of Analysis | Limited to transactional records. | Analyzes financial data to provide insights. |
Decision Making | Provides raw data for decision-making. | Offers insights and recommendations for decisions. |
Compliance | Ensures accurate recording for compliance. | Ensures compliance with accounting standards and regulations. |
Reporting | Generates basic financial statements. | Prepares comprehensive financial reports. |
Expertise Required | Requires basic understanding of accounting principles. | Demands in-depth knowledge of accounting principles and financial analysis. |
At the Core of Financial Management lie Bookkeeping and Accounting Services. Whether it’s small business accounting, freelance bookkeeping, or online accounting, these services form the backbone of financial operations. Accountants guide businesses through financial complexities as trusted advisors. All businesses rely on online accounting and bookkeeping in today’s digital age. Get your financial management handled by Filings First.
