Accounting and bookkeeping go hand in hand for all kinds of businesses. Many people have a misconception that bookkeeping and accounting are the same processes, which is not true. In simple terms, bookkeeping is the collection and documentation of the financial record. Whereas an accountant interprets and analyzes these documents and provides necessary insights for the future of your business. But both accounting and bookkeeping deals with financial data and need to know how accounting works.
The process of recording all the financial transactions of a business is called bookkeeping. Every single monetary transaction of the business should be recorded accurately and systematically which serves as a base for accounting. There are two types of bookkeeping systems. There is a single-entry system of bookkeeping and a double-entry system of bookkeeping. The process of bookkeeping involves preparing and maintain a general ledger account.
The process of recording, summarizing, analyzing, and reporting the financial transaction of the business is called accounting. It uses the financial documents prepared during the bookkeeping process and prepares a financial report at the end of the financial year. The different types of accounting include financial accounting, tax accounting, internal auditing, and management accounting. Accounting is a broader concept than bookkeeping. It involves recording adjusting entries, formulating and analyzing financial changes, assessing operational costs, and filing tax returns.
Bookkeeping refers to the process of recording the financial transactions of the company
Accounting includes analyzing and interpreting the recorded financial transactions of the company
The bookkeeping process provides input for accounting.
Accounting has a broader scope. It starts where bookkeeping ends.
It summarizes all the financial transactions in a given period.
It interprets and analyzes all the financial
documents in a given period
Decisions cannot be made based on bookkeeping.
Decisions are made based on accounting records
Financial statements are not prepared on the process of bookkeeping
The financial statement is a part of the accounting process
Bookkeeping doesn’t show the financial position of the company
Accounting clearly shows the financial position of the business
Even though these are two different processes, accounting needs bookkeeping procedures as a platform to interpret financial records. The accounts will be perfect only if the bookkeeping is done accurately. Thorough knowledge in the field is required for being a good accountant. they need to analyze and interpret financial documents. Whereas a bookkeeper only needs basic knowledge in commerce to perform their duty. Both accounting and bookkeeping is a vital part of running a business and it needs to be done accurately for the better financial performance of the company.