Difference between Bookkeeping and Accounting

Difference between Bookkeeping and Accounting Accounting Definition The definition of accounting is the process of interpreting, analyzing, summarizing and reporting the financial transactions of a business. The financial statements prepared in accounting are precise summaries of financial transactions during the accounting period. These statements summarize the financial position, operations, and cash flows of the company. Accounting consolidates financial information to make it understandable and clear to all stakeholders. It helps businesses to maintain timely and accurate records of their finances. Accountants maintain and compile records of a company's daily transactions into financial statements such as income statements, cash flow statements, and balance sheets. The financial statements help assess the performance of the company by all stakeholders. Definition of Bookkeeping Bookkeeping is the process of maintaining and recording all financial transactions in the original book of business entry. The bookkeeping process involves summarizing and organizing all the financial transactions of a company chronologically in a systematic manner. Bookkeeping focuses on day-to-day financial activities and business transactions. Bookkeeping maintains and records the books of account. All financial transactions such as tax payments, sales revenue, loans, interest income, salaries and other operating expenses, investments, etc., are recorded in the original books of account.Apart from maintaining financial records, bookkeeping services also include : • Managing and administering accounts receivable and payable; • Preparing tax reports; • Performing billing; • Reconciling financial statements with bank statements; • Monitoring performance indicators; • Perform budgeting or cash flow analysis; and • Reporting to management • Tidying up bookkeeping However, it is important to note that bookkeeping services are different from accounting services. Bookkeeping is concerned with maintaining day-to-day financial records. As such, bookkeepers gather financial information with the help of financial statements or prepared books. Difference between Bookkeeping and Accounting Bookkeeping is the process of systematically recording and classifying the financial transactions of an organization. Bookkeeping is said to be the foundation of accounting, while accounting is a part of the broader scope of finance. The most important focus of bookkeeping is to maintain accurate records of all monetary transactions of the business. Companies use this information to make major investment decisions. The Bookkeeping Department maintains the bookkeeping records. Accurate bookkeeping is essential for a business as it provides reliable information about the company's performance. The bookkeeping process consists of the following steps: • Preparing ledger accounts • Identifying financial transactions • Preparing a trial balance • Recording financial transactions Whereas accounting is the systematic process of recording, measuring, and communicating information about financial transactions that occur in a business. Accounting helps in determining the financial position of an enterprise and presenting the same to stakeholders. It helps businesses in short and long term decision making and also conveys the credibility of the company to the market. It is also known as the language of business. The objective of accounting is to provide a clear view of the financial statements to its users, which include investors, creditors, employees, and the government. Bookkeeping and Accounting Tips for Businesses • Bookkeeping and Accounting Tips for Businesses • keep business and personal finances separate • engage in disaster planning and data recovery • use cloud-based accounting software • avoid using cash • prepare for big expenses