Difference Between Bookkeeping vs Accounting
Both Bookkeeping vs Accounting are related and constitutes a primary part of a particular Business. Maintaining and storing transaction details related to business in a chronological manner is known as the act of BookKeeping. Whereas, accounting involves interpreting, analyzing, classifying and reporting of financial data related to business transactions so as to interpret business conditions in a proper manner. The primary part of Accounting deals with Bookkeeping or recorded financial transactions and the later part includes analyzing and reporting those financial data.
At a very surface level, it’s not easy to discriminate between Bookkeeping vs Accounting, but the experts can really know the difference between Bookkeeping vs Accounting. Professionals who are engaged in maintaining Accounts know that the treatment is not the same. For example- If a Business Sells goods worth INR 100000 to X Ltd at credit and receives 60% after 30 days, then the Bookkeeping part would only constitute of recording the Sales number and recording the Cash received the figure. On the other hand in Accounting the Sales number will be posted in the Income Statement under Revenue and the Accounts Receivable will be increased by INR 100000 till next thirty days till a part of the Sales are received as cash. While after receiving INR 60000 or 60% of the total Sales, Cash would increase by INR 60000 and Accounts Receivable would decrease by INR 60000.
Bookkeeping vs Accounting Infographics
Below is the top 8 difference between Bookkeeping vs Accounting
Key difference between Bookkeeping vs Accounting
Both Bookkeeping vs Accounting are popular choices in the market; let us discuss some of the major Differences Between Bookkeeping vs Accounting:
- Bookkeeping is an art of recording transactions of business as per the Date. On the other hand, Accounting consists of classifying, segregating, analyzing and reporting of transactions recorded by a bookkeeper. Basically, Bookkeeping can be termed as maintaining of raw-data and it’s being processed through the subject of Accountancy.
- A business cannot be judged by the data accumulated through bookkeeping until and unless it is being processed through Accounting. In other words, Accounting acts as a bridge between Bookkeeping and Management decision.
- A bookkeeper may or may not require the knowledge of Accounting, he/ she can follow a certain mechanical process to maintain the task of Bookkeeping. Whereas analyzing, classifying, interpreting, segregating accounting data need the knowledge of Accounting and Finance. The functional part includes studying and classifications of Accounting heads/ groups.
- The process of Bookkeeping is followed by Accounting. On the other hand, Accounting is followed by Management accounting where they get to know about different types of financial ratios; based upon these ratios the management can make strategic changes and modifications of the business which are both long-term and short-term in nature.
- Bookkeeping includes Supplier’s Ledger, customer’s ledger and general ledger whereas Accounting involves the preparation of Financial Statements like Income Statement, Balance sheet, and Cash flows. Finalization of accounting needs to be done by an accountant and it should be verified through Auditing process.
- Bookkeeping is generally checked by the Accountants before they are prepared for the Financials statements.
Head to Head comparison Between Bookkeeping vs Accounting
Below is the topmost comparison between Bookkeeping vs Accounting
|Basis Of Comparison Between Bookkeeping vs Accounting||Book-Keeping||Accounting|
|Meaning||Related to identifying, measuring and recording of financial transactions in a business.||Related to the process of summarizing, interpreting, analyzing and communicating through Ledger and journal.|
|Objectives||Primary objectives of Bookkeeping involves storing financial transactions in a chronological manner.||Segregating and Posting of Financial data under proper heads and interpreting business from the ongoing financial transactions.|
|Management Decision||Not possible to take business decisions from the data available from Book-Keeping, because most of them are scattered data.||As the primary function involves classifying and grouping of data, it is very easy for the management to know the health of the Business and to take unbiased strategies for improvement.|
|Financial Statement Preparation||Financial Statements are not prepared through the bookkeeping process.||Financial statements like Income statement, Balance-sheet; Cash flows are made from Accounting process.|
|Qualifications and Skills||Book-keeping does not require any additional skill set, an undergraduate can do the process.||Accounting knowledge is required due to the complexity and of the process. A person with sound accounting and Finance knowledge is suitable to perform the job.|
|Analysis and interpreting||Bookkeeping involves the only recording of financial transaction in a chronological and systemic manner.||After the classifications of journal and ledger, proper analysis and classifications are required which are again forwarded for reporting to different functional segments of an organization.|
|Types||Bookkeeping can further be divided into two different types namely Single entry and Double entry bookkeeping.||Types of accounting can broadly be classified as Corporate accounting and Management accounting.|
|Difference between Book Keepers and Accountants||Book-keepers are basically professionals who deal with Book-keeping. They have been accurate, need knowledge about day to day accounting transactions, should follow the chronology etc. Their jobs are generally approved by an Accountant.||Accountants should have the knowledge of Accounting, Finance, and Commerce as a whole. Should require holding at least a bachelor degree in Commerce or a diploma in Accountancy. They are overseen by a Chartered Accountant.|
Bookkeeping vs Accounting – Final Thoughts
For maintaining the day to day transactions in every business or non-profit entity, a reliable procedure is required which can store data in a chronological manner which could support the principles of financial accounting. Thus this system of recording transaction is called bookkeeping. Bookkeeping can further be divided into a double entry and single entry system. Single entry system consists of only Cash-book whereas Double entry system has a financial accounting system where every single entry has different on two different nominal ledgers. Accounting, on the other hand, deals with a bigger picture where they bridge the gap with Book-keeping and Management Accounting which helps the management teams to take decisions on the basis of different ratios, different financial reports, and corporate accounting data. Both Bookkeeping vs Accounting go side by side and constitutes an integral part of any organization, be it profitable or non-profitable organization.
This has a been a guide to the top difference between Bookkeeping vs Accounting. Here we also discuss the Bookkeeping vs Accounting key differences with infographics, and comparison table. You may also have a look at the following articles –