Similarities and Differences between Accounting and Bookkeeping
Many times, accounting is confused for accounting. Accounting is the systematic way of identifying, keeping records, classification, analyzing and communicating financial information over a given period of time in order to realize the losses and profits of a firm whereas book keeping is a part of the process in accounting through recording of financial transactions. Book keeping provides information essential for preparation of accounts. Both processes have their similarities and differences as outlined below.
In the accounting and book keeping, records are extremely important. Book keeping demands daily noting down for simple accessibility when it comes to preparing reports and bookkeeping demands the documents for preparation and analyzing financial statements.
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From the daily transaction records, they are classified into various books i.e. bank publication that’s used to document the deposits and withdrawals made, buy book for those records of all purchases made on credit, money book used for the purpose of documenting all cash payments such as trade payables like trade payables and petty cash purchases and money receipts like trade receivables and cash sales and finally the sales book by which non-cash sales are listed together with client’s key specifics and later transferred into the customer’s account.
Accounting uses this income statement, balance sheets and even cash flow statements because its main tools while in publication keeping journals and ledgers are used.
Financial statement preparation
While book keeping does not require any preparation of Financial statements, accounting is largely the preparation of these financial statements such as balance sheets, profit and loss statement and cash flow statements.
The direction Isn’t involved in book keeping but they’ve a particular interest in accounting documents because it is useful in checking on the operation of an organization and making of future choices based on that information.
Whereas information provided by publication keepers cannot be Solely utilized to make conclusions, accounting data plays a significant part in making decision making in a company.
Book keeper’s roles are mainly to collect, record and classify information relating to financial transactions while accounting requires more skilled personnel to interpret and communicate the implications for decision making.
Accounting is a bit complicated therefore it requires particular Skills while on the other hand accounting doesn’t require any specific skills because of its simple nature.
Accounting is classified to cost, management and financial accounting among other categories while reserve keeping is categorized into single entry and double entry.
Lots of people tend to confuse book keeping and accounting to be the exact same thing. However, since we have seen in this paper the two processes Share some common features and as well have their differences that differentiate one from the other.