Difference between accounting and book keeping
accounting and book keeping :
While bookkeeping and accounting can be spoken of in the same context on a myriad of occasions, they cannot, however, be defined as one and the same. Therefore, this article aims to bring out the slight differences between the two concepts for the benefit of those who wish to know.
What is accounting?
Accounting can be defined as the practice which deals with the monitoring of monetary transactions that occur within a financial institution, at the same time keeping records of the money flow of the company and ensuring that these financial interactions occur according to rules and regulations of the government.
Accountants are also responsible for planning the budget of a company as well as offering financial advise on favorable investment opportunities for a company. They also prepare tax returns, financial documents, documents regarding bills, profits and all other financial interactions of the company as required and at the same time, keeping an organized track records of all financial transactions of the company up to date which is also known as bookkeeping.
An accountant in charge of such a range of duties are required to possess qualifications such as Chartered Accountants (ACA), Chartered Certified Accountants (ACCA), Chartered Institute of Management Accountants (CIMA) or Associate of Accounting Technicians (AAT) which in turn proves that he or she has obtained a minimum standard required for accountancy. It also means that these individuals hold professional indemnity insurance and that their work is being monitored for its quality by the professional body to which they belong which in turn ensures a safe and a reliable service on their part.
What is bookkeeping?
Bookkeeping, also known and record keeping, is an integral part of accounting and has proved itself an essential process which serves in minimizing errors that tend to occur when recording a variety of financial activities which occur within a company over time. Bookkeeping includes recording, classifying and summarizing data relating to sales, purchase, revenues and expenditure of a company. The name derives itself from the traditional method of keeping these records in books but with the development of the technology, various software designed for the purpose have made bookkeeping an easier task. The type of books or documents used for bookkeeping vary according to the business but certain more general types of books used are daybook, ledger, cashbook, business checkbook, etc.
What is the difference between accounting and bookkeeping?
Accounting is a fairly large area which overseas all financial interactions of a company of which bookkeeping is an essential part. While bookkeeping includes recording, classifying and summarizing data and preparing necessary financial information for accounting, accounting involves the reflection of the results of transactions which is obtained through bookkeeping and analyzing them according to the principles, standards, and statutory requirements in the financial statements and other business reports. Bookkeeping does not analyse. It merely reports.
While bookkeeping is done by a bookkeeper, accounting is done by an accountant. The results that each one produces are used by different people as well. While the bookkeeping data is utilized by the accountant for analyzing the financial aspects of the company, the accounting results are utilized by the internal and external users of the company consisting of the management and other peoples such as owners, creditors, etc.
Also, bookkeeping is usually performed by one or two people whereas the accounting department of a company is fairly large and is comprised of many individuals performing different tasks. Also, whereas accountants are responsible for the analyzing, dissecting and a maintaining a constant vigil over the overall financial procedure of the company, the bookkeeper is merely responsible for the systematic entering of data and summarizing this information to be used by accountants.