Bookkeeping vs Accounting

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

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.

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