Accounting and Bookkeeping

Accounting and Bookkeeping

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Accounting and Bookkeeping - Process, Procedure, Document Required, Fees, Eligibility, Duration

Bookkeeping and accounting are the two most important processes which are very important for every business group. Bookkeeping is used in a business to record financial transactions whereas accounting is used to interpret, classify, analyze, report, and summarize the financial data. Though bookkeeping and accounting seem to be similar, there is a thin line to differentiate between them.

Bookkeeping is the system of recording and maintaining all financial transactions chronologically in a systematic way in the original books of entry of a business.  All the financial transactions including the payment of taxes, loans, sales revenue, payroll interest income, and other operational expenses, investments, etc. are maintained in the original books of accounts.

Accounting is the system of understanding, examining, reporting, and summarizing the financial transactions of a business organization. Accounting means compiling and maintaining the records of the daily transactions of a company into financial statements like balance sheets, income statements, and statements of cash flows.

Difference between Bookkeeping and Accounting

Though bookkeeping and accounting seem to be similar because both deals will financial data, there are some differences which are as follows:

  • Bookkeeping is the basis of the accounting system. Accounting utilizes the data offered by bookkeeping to plan financial reports and statements.
  • Bookkeeping is one section of the whole accounting process, whereas has a broader scope than bookkeeping.
  • The result of the bookkeeping system is giving accounting input. On the other hand, the result of accounting is organizing financial statements for creating informed decisions and assessments.
  • The main aim of bookkeeping is to maintain a chronological and systematic record of the financial activities of a business. Whereas, the main aim of accounting is to report the financial strength and acquire the results of the operating activity of a company.
  • The objective of bookkeeping is, to sum up, the effect of all financial transactions of a company for a given period. On the other hand, the objective of accounting is to understand and examine financial information for informed decisions.
  • The person in charge of bookkeeping is called a bookkeeper and the person in charge of accounting is called an accountant.
  • Bookkeepers do not need any special skill, talent or knowledge, or skill. Whereas, accountants need special knowledge and skills of different accounting policies and practices.
  • The financial reports are not a part of the bookkeeping procedure. It is prepared under the accounting procedure.
  • The bookkeeping procedure is compliant with the accounting concepts and conventions.  The accounting process and techniques for analyzing and interpreting financial systems can differ from one entity to another.

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Accounting and Bookkeeping Frequently Asked Questions

There are some advantages of the accounting process in a business which are as follows: • Accounting helps in the maintenance of business records systematically in the books of accounts. • It helps in making financial statements Balance Sheets, trading and profit and loss accounts, etc. • If there is a proper recording of financial transactions, decision making becomes easier for management • The systematic records of the financial transactions work as evidence in legal matters. • Financial information of the organization is easily available to stakeholders. • Various tax authorities rely on the accounts maintained by the management for the resolution of taxation matters.
There are some advantages of the Bookkeeping process in a business which are as follows: • Bookkeeping helps you to create your budget accurately. • A systematic bookkeeping process keeps you prepared for tax. • It helps you maintain organized records. • A proper bookkeeping process helps you to keep track of your cash flow. • With a bookkeeping system in place, it helps in easier and faster audits. • The bookkeeping process helps you to check the accuracy of each payroll period.

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