Difference between Accounting and Bookkeeping?

Every business and not-for-profit entity needs a reliable bookkeeping system based on established accounting principles. Keep in mind that accounting is a much broader term than bookkeeping. Bookkeeping refers mainly to the record-keeping aspects of accounting; it's essentially the process of recording all the information regarding the transactions and financial activities of a business.

Bookkeeping is responsible for the recording of financial transactions. It is the systematic recording of financial and economic transactions. Whereas, Accounting is responsible for interpreting, classifying, analyzing, reporting and summarizing financial data. It is the analysis and interpretation of bookkeeping records. The biggest difference between accounting and bookkeeping is that accounting involves interpreting and analyzing data and bookkeeping does not. In fact, bookkeeping is complementary to the Accounting process.

The terms "bookkeeping" and "accounting" do not have the same meaning. Accounting is much wider than bookkeeping. The difference between bookkeeping and accounting arises due to the following reasons: Points of difference 1. Area of work Bookkeeping Bookkeeping involves the recording of business transactions in a prescribed manner Accounting Accounting in addition to recording of business transactions, also includes other matter such as making adjustments, preparation of income statement, balance sheet and interpreting results thereof. Measuring, preparation, analyzing, and interpretation of financial statements. To collect and present financial information. To see how the company is performing, to monitor day to day accounting operations, and for taxing Balance sheets, profit and loss ledgers, positional declarations, and cash flow statements. Professional knowledge and skill is prerequisite for an accountant.

2. Purpose

Keeping an account of all receipts, revenues, expenditure in order to create accounting ledgers. 3. Goal To see how the company is performing daily and where the money is being earned from and utilized. 4. Tools Supplier ledger, customer ledger and general ledger and cash book. 5. Knowledge and skill No professional knowledge and skill is

6. Scope

7. Nature of job

required for a bookkeeper. Bookkeeping is an initial stage of accounting therefore, the scope of bookkeeping is limited. It provides the primary information about the business. Much of the work of a bookkeeper is clerical in nature and the job is is mainly preliminary.

The scope of accounting is wider.

8. Information

It provides the primary information to the business. Financial statements are not prepared from bookkeeping records. It does not give the complete picture of the financial condition of the business unit. It does not provide any information for taking managerial decisions It has no branches

The work of accountant is technical in nature. Modern accounting serves as eyes and ears to the management. It has become the foundation on which the whole structure of commerce rests and without which no business can be run at all. It provides information about the final results of the business

9. Financial decisions

Financial statements are prepared from accounting records.

10. Business conditions

It gives the complete picture of financial condition of the business unit.

11. Managerial decisions

It provides information for taking managerial decisions.

12. Branches

It has several branches, e.g., financial accounting, managerial accounting, cost accounting etc.

Every business and not-for-profit entity needs a reliable bookkeeping system based on established accounting principles. Keep in mind that accounting is a much broader term

than bookkeeping. Bookkeeping refers mainly to the record-keeping aspects of accounting; it's essentially the process of recording all the information regarding the transactions and financial activities of a business. Defining bookkeeping Bookkeeping is an indispensable subset of accounting. Bookkeeping refers to the process of accumulating, organizing, storing, and accessing the financial information base of an entity, which is needed for two basic purposes:

Facilitating the day-to-day operations of the entity Preparing financial statements, tax returns, and internal reports to managers

Bookkeeping (also called recordkeeping) can be thought of as the financial information infrastructure of an entity. The financial information base should be complete, accurate, and timely. Every recordkeeping system needs quality controls built into it, which are called internal controls. Defining accounting The term accounting is much broader, going into the realm of designing the bookkeeping system, establishing controls to make sure the system is working well, and analyzing and verifying the recorded information. Accountants give orders; bookkeepers follow them. Accounting encompasses the problems in measuring the financial effects of economic activity. Furthermore, accounting includes the function of financial reporting of values and performance measures to those that need the information. Business managers, investors, and many others depend on financial reports for information about the performance and condition of the entity. Accountants design the internal controls for the bookkeeping system, which serve to minimize errors in recording the large number of activities that an entity engages in over the period. The internal controls that accountants design are also relied on to detect and deter theft, embezzlement, fraud, and dishonest behavior of all kinds. Accountants prepare reports based on the information accumulated by the bookkeeping process: financial statements, tax returns, and various confidential reports to managers. Measuring profit is a critical task that accountants perform a task that depends on the accuracy of the information recorded by the bookkeeper. The accountant decides how to measure sales revenue and expenses to determine the profit or loss for the period.

1. http://www.managedstudy.com/financial_accounting/bookkeeping_and_accounting.htm

2. http://www.dummies.com/how-to/content/the-difference-between-bookkeeping-andaccounting.html 3. http://www.differencebetween.info/difference-between-accounting-and-bookkeeping