• Business
  • Finance
  • Banking
  • Education
  • General
  • Law
  • Science
  • IT
  • English

Key Differences

Know the Differences & Comparisons

Difference Between Bookkeeping and Accounting

Last updated on July 26, 2018 by Surbhi S

accounting vs bookkeepingMany use the terms bookkeeping and accounting interchangeably, but the fact is the former is the first step to the latter, i.e. bookkeeping is the stepping stone of accounting. As far as the scope is of these two processes is concerned, Accounting is much wider and analytical than bookkeeping. Bookkeeping it is only a part of accounting, which creates a base for accounting.

While bookkeeping stresses on the recording of transactions and so the work is clerical in nature. On the other hand, accounting is all about summarizing the recorded transactions, which require a high level of subject knowledge, expertise, analytical skills, conceptual understanding and so forth. Take a glance at the article, which explains the difference between bookkeeping and accounting in tabular form.

Content: Bookkeeping Vs Accounting

  1. Comparison Chart
  2. Definition
  3. Key Differences
  4. Conclusion

Comparison Chart

Basis for ComparisonBookkeepingAccounting
MeaningBookkeeping is an activity of recording the financial transactions of the company in a systematic manner.Accounting is an orderly recording and reporting of the financial affairs of an organization for a particular period.
What is it?It is the subset of accounting.It is regarded as the language of business.
Decision MakingOn the basis of bookkeeping records, decisions cannot be taken.Decisions can be taken on the basis of accounting records.
Preparation of Financial StatementsNot done in the bookkeeping processPart of Accounting Process
ToolsJournal and LedgersBalance Sheet, Profit & Loss Account and Cash Flow Statement
Methods / Sub-fieldsSingle Entry System of Bookkeeping and Double Entry System of BookkeepingFinancial Accounting, Cost Accounting, Management Accounting, Human Resource Accounting, Social Responsibility Accounting.
Determination of Financial PositionBookkeeping does not reflect the financial position of an organization.Accounting clearly shows the financial position of the entity.

Definition of Bookkeeping

The process of complete and systematic record keeping of the monetary transactions of an organization by the bookkeeper is known as bookkeeping. It is the activity of keeping full documentation of every single financial transaction of the entity to form a base for the accounting process. The purpose of bookkeeping is to disclose the correct picture of income and expenditure at the end of the accounting period.

The task of bookkeeping is performed by the bookkeeper who is responsible for recording the day-to-day business transactions like incoming and outgoing of cash, goods sold or purchased on credit, expenses incurred, etc. in an orderly manner. The bookkeeper captures the transactions in the day books like purchase, sales, purchase return, sales return, cash book, journal, etc. and posts them in the concerned ledger, after that trial balance is prepared. There are two methods of Bookkeeping:

  • Single Entry system of Bookkeeping
  • Double Entry system of Bookkeeping

Definition of Accounting

Accounting is simply a business language which provides information about the financial status of the organization. It is a complete procedure which starts from the recording of transactions and ends on reporting of the financial statements at the end of the financial year.

In accounting the monetary transactions of an organization are identified and systematically recorded, then they are grouped, i.e. the transactions of similar nature are classified into a common group and then it is summarized in a way which can be presented to the users of the financial statement. After this thorough analysis of financial statements are done which will help in interpreting the conclusions and finally communicating the results of the financial statements to the interested parties.

The purpose of accounting is to provide the true and fair view of the financial statements to its users, i.e. investors, employees, creditors, suppliers, managers, government and the general public in such a manner which is easily understandable to them for a particular financial year. The financial statement prepared with the help of accounting states about the wealth, profit and financial position of the entity. The branches of accounting are:

  • Financial Accounting
  • Cost Accounting
  • Management Accounting
  • Human Resource Accounting
  • Social Responsibility Accounting

Key Differences Between Bookkeeping and Accounting

The points given below are substantial, so far as the difference between bookkeeping and accounting is concerned:

  1. Bookkeeping is keeping proper records of the financial transactions of an entity. Accounting is recording, measuring, grouping, summarizing, evaluating and reporting of transactions of the entity which are in monetary terms.
  2. The task of Bookkeeping is performed by a bookkeeper whereas the accountant performs the task of Accounting.
  3. Financial Statement forms a part of the accounting process but not the bookkeeping process.
  4. Accounting records are taken as a base for taking managerial decision unlike bookkeeping records, in which decision making is difficult.
  5. Bookkeeping is the first step to Accounting.
  6. Bookkeeping does not disclose the correct financial position however for purpose accounting helps the users in showing the true and fair view of the financial status and profitability of an organization.

Conclusion

Bookkeeping works as a platform to Accounting procedure as bookkeeping is the initial stage or inception of accounting. Hence, Bookkeeping is an inseparable part of Accounting. Bookkeeping acts as a base for the Accounting and so if the bookkeeping of records is done properly, then it is supposed that accounting will also be perfect and vice versa. The task of Bookkeeping is a clerical one. Therefore, a little knowledge of commerce is sufficient for it while the task of accounting is an analytical one so thorough knowledge in this field is required.

Related Differences

  • Difference Between Arithmetic and Geometric Sequence
  • Difference Between Sole Proprietorship and Partnership
  • Difference Between BPO and KPO
  • Difference Between Cash Market and Future Market
  • Difference Between Census and Sampling

You Might Also Like:

financial vs management accountingDifference Between Financial Accounting and Management Accounting Cash Accounting Vs Accrual AccountingDifference Between Cash Accounting and Accrual Accounting Cost Accounting Vs Financial ManagementDifference Between Cost Accounting and Financial Accounting auditDifference Between Accounting and Auditing accounting-vs-finance-thumbnailDifference Between Accounting and Finance Difference Between Single Entry System and Double Entry System

Comments

  1. Panashe Dinha says

    January 12, 2017 at 1:31 am

    Nice everything is briefly described

    Reply
  2. Ema Styles says

    January 29, 2017 at 10:47 pm

    Thanks so much. It’s very helpful. Easy and short.

    Reply
  3. Shane Maxwell says

    May 12, 2017 at 3:44 pm

    Thank you.

    Reply
  4. Medvisor consultant says

    August 3, 2017 at 10:08 am

    Hi,

    Thanks for sharing a fantastic information about the bookkeeping and accounting ,I read this kind of information and remember the best point of this post which help me to run a business successful after reading a post .

    Thanks

    Reply
    • Surbhi S says

      August 3, 2017 at 10:32 am

      To all the readers,
      We are really glad to know that you find the article helpful. Thanks for your appreciation, keep reading and sharing,

      Reply
  5. Morris Edwards says

    August 19, 2017 at 1:29 pm

    This is one aspect where people are often confused. Thanks for sharing a fantastic information about this.

    Reply
  6. Syed K siraj says

    December 5, 2017 at 4:48 am

    Very useful information for a basic learner,
    explanations is very simple and understanding to everyone…

    Reply
  7. Accounting and bookeeping services says

    September 6, 2019 at 4:43 pm

    Nice information

    Reply
  8. Dee Nur says

    December 4, 2019 at 7:09 am

    Well illustrated, the information speaks volumes. Thanks for the input.

    Reply
  9. Ashish Sahu says

    July 15, 2020 at 2:38 pm

    Now i clearly know the difference between bookkeeping and accounting. Really good article. well done, keep it up!

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Top 5 Differences

  • Difference Between PERT and CPM
  • Difference Between Micro and Macro Economics
  • Difference Between Developed Countries and Developing Countries
  • Difference Between Management and Administration
  • Difference Between Qualitative and Quantitative Research

Related Differences

  • Difference Between Arithmetic and Geometric Sequence
  • Difference Between Sole Proprietorship and Partnership
  • Difference Between BPO and KPO
  • Difference Between Cash Market and Future Market
  • Difference Between Census and Sampling



New Additions

  • Difference Between Society and Community
  • Difference Between Sourcing and Procurement
  • Difference Between National Income and Per Capita Income
  • Difference Between Departmental Store and Multiple Shops
  • Difference Between Thesis and Research Paper
  • Difference Between MBO and MBE
  • Difference Between Receipt and Payment Account and Income and Expenditure Account
  • Difference Between Stock Dividend and Stock Split
  • Difference Between FOB and CIF Contracts
  • Difference Between Verification and Valuation
fb-follow youtube follow

Copyright © 2023 · Key Differences · Contact Us · About Us · Privacy