Accounting Vs. Bookkeeping, businesses use both these essential phases of accountancy, where bookkeeping helps to keep a track record of the cash flow. Accounting helps in analyzing and preparing a financial report of various transactions, essential for tax regulators, investors, management teams, etc. However, many times people misunderstand them as similar concepts.
Confused? Both may seem to be similar professions to an untrained person, yet, they are very different from each other. Through this blog, let us learn what is the difference between bookkeeping and accounting and what are the aspects that differentiate these terms from each other.
Top 7 Differences Between Bookkeeping and Accounting
Before counting on the difference between bookkeeping and accountancy, let’s get a basic idea of the definitions of the terms.
Bookkeeping: Bookkeeping, the word is a combination of two words, book and keeping. In simple words, bookkeeping means maintaining and keeping books like journals, ledgers, etc. Bookkeeping relates to keeping or maintaining records of every business transaction on a day-to-day basis. This makes understanding the nature of the transaction and its impact on the overall business activity. Again, while recording the transactions, it is ensured that the documental proof is also presented supporting the transactions.
Accounting: Accounting relates to the system that records, identifies, and preserves economic events for communicating the results. It means succinct the transactions recorded, construing them, and finally sharing their results. Accounting is a business language as it generates the results that are important to concerned parties like investors, tax authorities, government agencies, shareholders, employees, creditors, etc. Accounting includes activities like transaction recording, rectification of errors, ledger posting, and preparing income statements, trial balances, and balance sheets.
Here Are The 7 Key Differences Between Bookkeeping and Accounting
Bookkeeping: Bookkeeping means identifying, computing, and recording various financial transactions daily. It is the foundation of accounting.
Accounting: Accounting considers the transactions recorded in the bookkeeping process for preparing various financial statements and records.
Bookkeeping: The primary objective of bookkeeping is storing or recording every financial transaction sequentially.
Accounting: The main purpose of accounting is posting and segregating financial data or transactions into relative categories. It also involves construing businesses from enduring financial transactions.
Bookkeeping: Bookkeeping is generally a basic process in which strewn data is collected. The data collected is raw data and hence, cannot be used while making important business decisions.
Accounting: The main aim of accounting is grouping and classifying data which can be used by the management to make important decisions at the time of working on improvements and unbiased strategies.
Bookkeeping: Bookkeeping is a basic process for recording financial transactions, and hence, it is difficult to prepare financial statements through this process.
Accounting: Accounting is a process that helps in preparing various financial statements like income-expense statements, balance sheets, etc. as the cash flow transactions are analyzed and categorized very well.
Bookkeeping: Bookkeeping is limited to merely recording or collecting financial transactions systematically.
Accounting: Accounting comes with a brief outlook. Accounting relates to the proper classification and analysis of ledger and journals for preparing a final financial report that can be used by various segments of the company.
Bookkeeping: Bookkeeping includes two types of entries, that is, single and double entries.
Accounting: In accounting, entries can be classified with a broad concept including management accounting and corporate accounting. It involves preparing the budget and loan proposals for the company.
Bookkeeping: Bookkeeping is a clerical kind of work. The bookkeepers need to have basic knowledge and skills in accounting and double-entry systems.
Accounting: Accountants need special skills and knowledge of various accounting policies, procedures, principles, and practices.
Both book keeping and accountancy are complementary as well as supplementary to each other. Where bookkeeping is a process following various accounting concepts and conventions, accounting is a process, method, or procedure that interprets financial reports, the analysis of which varies from one object to another. Bookkeeping is limited to giving daily financial details, while accounting gives you a clear vision of the transactions that took place in the financial year.
The Latest Trends in Bookkeeping and Accounting
Innovation has brought various changes in various fields, and bookkeeping and accounting haven’t remained untouched as well. Changes are observed in the operations of both processes over time. Here are some of the upcoming trends one might observe in the field of bookkeeping and accounting.
Merging of Functions
The difference between accounting and bookkeeping is slowly vanishing. With the development of advanced software and other technologies, some functions of accounting have already merged into bookkeeping functions. Again, the latest bookkeeping software is now used for creating financial statements which was the work of accountants.
Expansion of Bookkeeping Term
Many businesses still depend on the bookkeeping process for recording their financial transactions daily. However, today it is not only limited to balancing bank statements, reconciling statements, and data entry. The advanced bookkeeping software handles many more functions.
Extended Services
Before, the bookkeepers used to work on daily entries only. But with the help of the latest technologies and updated software, bookkeepers and accountants can now support their customers with additional services like credit card reconciliation, payroll processing, etc.
Initiation of Smartphones
Nearly every business is looking forward to shifting their maneuvers online. For this, business owners also need their data handy which is now possible through smartphones. Hence, bookkeepers and accountants also generate reports that are easily accessible online to owners and clients on their smartphones for quick decision-making.
Effectual Services
The advanced technologies and services have proved to be a boon for advising and consulting companies. The advancement in analytical tools has made bookkeeping services and tax preparation services quite cheap and proficient.
Why Choose Us for Bookkeeping and Accounting Services?
Bookkeeping and accountancy are two very essential concepts for every business. We at DataPlusValue, have served for more than a decade in this domain serving various satisfied clients around the globe. We have a team of professionals and certified accountants who keep on upgrading themselves with the latest skills, techniques, and market scenarios. Outsourcing your accountancy needs with us would help you achieve concentrated results at an affordable cost.
So, get in touch with your bookkeeping and accounting needs today.
