What is the difference between bookkeeping and accounting?

The accounting process includes recording, interpreting, classifying, studying, reporting and summarizing economic facts. Bookkeeping is the technique of recording monetary transactions. Recording economic transactions is the primary part of and the foundation of the accounting technique.

Bookkeeping is the process of recording financial transactions. Recording financial transactions is the first part of and the foundation of the accounting process.

The accounting process involves recording, interpreting, classifying, analyzing, reporting and summarizing financial data.

bookkeeping is the methode of recording the transaction in the books of account

Accounting describe the rules and regulation that how to record the financial transaction

To record the financial activities in the general journal and posting them into their respective ledger comes under under the umbrella of bookkeeping. After that the job of the accounting starts. 

Generally, a bookkeeper is a person without a college degree in accounting who performs much of the data entry tasks. This includes entering the bills from vendors, paying bills, processing payroll data, preparing sales invoices, mailing statements to customers, etc.

 

The accountant is likely to have a college degree with a major in accounting and takes over where the bookkeeper leaves off. The accountant will prepare adjusting entries to record expenses that occurred but are not yet entered by the bookkeeper. (Examples include interest on bank loans since the last loan payment, wages earned by employees that will be processed next week, etc.) Other adjustments to accounts include the calculation and recording of depreciation, establishing allowances for uncollectible accounts, etc.). After making the adjusting entries, the accountant prepares the company's financial statements (income statement, balance sheet, statement of cash flows.) The accountant also assists the company's management to understand the financial impact of its past and future decisions.

 

The distinction between accountant and bookkeeper keeps changing as accounting software and other software evolves. For many years, companies used the title of accounting clerks for employees doing the tasks formerly performed by bookkeepers. The accounting clerks are usually supervised by an accountant.

A common question is whether there is any difference between accounting and bookkeeping. We will begin with bookkeeping, since it is essentially a subset of the larger topic of accounting. Bookkeeping is the recordation of basic accounting transactions, such as:

• Issuing invoices to customers
• Recording invoices from suppliers
• Recording cash receipts from customers
• Paying suppliers
• Recording changes in inventory
• Processing payroll
• Processing petty cash transactions

 

These transactions are mechanical in nature; that is, the bookkeeper follows a prescribed set of procedures on a repetitive basis to record a common activity. These common bookkeeping tasks are entirely adequate for the accounting needs of a small business.

A bookkeeper could compile financial statements from the transactions just described. However, those financial statements would be incorrect to some extent, because they would not include the following additional actions that are usually handled by an accountant:

• Accruing or deferring expenses
• Accruing or deferring revenue

The broader field of accounting includes the use of these accruals. In addition, accounting encompasses the following activities:

• Creating the chart of accounts
• Setting up the general ledger
• Designing the financial statements
• Issuing customized management reports to address specific issues
• Altering the classification or recordation of transactions to meet certain accounting standards
• Creating a budget and comparing it to actual results
• Compiling tax returns from the financial information
• Creating a set of controls within which the financial system operates
• Designing a record keeping, archiving, and document destruction system

Usually, there is at least one trained accountant responsible for the accounting operations of a medium to large-sized business, and who sets up the procedures that are then followed by a larger number of bookkeepers.

In short, the difference between accounting and bookkeeping is that bookkeeping focuses on repetitive business transactions, and so is a subset of the much larger set of tasks that can be encompassed by accounting.

There are also significant differences between the bookkeeper and accountant positions. The bookkeeper role is broad-based, with one person typically handling all of the accounting transactions for a small business. The bookkeeper tends to be very experienced, but is more likely to be lacking in formal accounting training. A bookkeeper with a great deal of responsibility may be referred to as a full-charge bookkeeper. Conversely, the accountant is more likely to work exclusively on a specific area, such as fixed assets or the general ledger, and is more likely to have formal training in the accounting function. There is also a career path for accountants, which leads to the assistant controller and controller positions.

bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data.