Bookkeeping and Accounting both are playing a very important role in the business. But the difference between bookkeeping and accounting is that in bookkeeping, we record all the financial transactions in the books of accounts while in accounting we have processed these all recorded transactions by analyzing, classifying, summarising, and reporting financial data.
Meaning of Bookkeeping: –
Bookkeeping is the primary function of the business. Bookkeeping is the process of recording and maintenance of books of accounts. In this process, the following basic actions are performed by the bookkeeper: –
- Identification of the nature of the business transactions and select the transactions which have Financial Nature.
- Measuring the monetary value of these transactions.
- Recording all these transactions in the books of original entry in chronological order on a daily basis.
- keeping full documentation related to these transactions.
- Classifying all these transactions into the related ledger accounts.
Meaning of Accounting: –
Accounting is the secondary function of the business. It starts where the function of bookkeeping is ended. In this process, the following basic actions are performed by an accountant: –
- An accountant has to summarise all the classified transactions by the bookkeeper in the shape of the financial accounting/ Final account.
- Analysis of the result of the final accounts. i.e. Gross profit, Net profit.
- provide adequate information to the owner.
Chart of Difference Between Bookkeeping and Accounting: –
Basis of Difference
|Bookkeeping means identifying, measuring, recording and classifying all business financial transactions in the books of accounts.||Accounting means to summarise, analyzing, interpreting and communicating the result of all business financial transactions to the owner or related parties in the form of financial statements.|
|The main object of the bookkeeping is to recording all business financial transactions in a systematic manner and keeping all documentation related to these transactions.||The main aim of accounting is to get to know and communicate about the growth or decline rate of the business for a particular period.|
|Bookkeeping is the first step of the accounting process so it is not dependent on accounting.||Accounting is the second step of the accounting process so it is not dependent on bookkeeping.|
|Knowledge||For bookkeeping no higher and special knowledge is required about the core of the accounting process.||For accounting as compare to bookkeeping an accountant must have higher and special knowledge about the core of the accounting process.|
|Branches||Bookkeeping has no branch, but it can be divided into two methods, a single entry system, and a double-entry system.||Accounting has the following branches: –
|Tools||Bookkeeping has the following tools to perform duty:
||Bookkeeping has the following tools to perform duty:
|Financial Statement||The financial statement is not part of bookkeeping.||The financial statement is part of the accounting process.|
|Work was done by||Usually, by Junior staff of the accounting department.||Usually, by senior staff of the accounting department.|
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The bookkeeping is the 1st stage of the accounting process and where bookkeeping ends an accounting is started. Bookkeeping is part of accounting and provides the foundation for accounting. Without bookkeeping we can’t perform accounting activities.