In financial parlance, the terms bookkeeping and accounting are almost used interchangeably. However, these concepts are different. While bookkeeping is all about recording of financial transactions, accounting deals with the interpretation, analysis, classification, reporting and summarization of the financial data of a business.
What is Bookkeeping?
Bookkeeping is the process of systematic recording and classification of financial transactions of an organisation.
Bookkeeping is said to be the basis of accounting, whereas accounting forms a part of the broader scope in finance.
The most important focus of bookkeeping is to maintain an accurate record of all the monetary transactions of a business. Companies use this information to take major investment decisions.
The bookkeeper maintains bookkeeping records. Accurate bookkeeping is critical for business as it gives a piece of reliable information on the performance of a company.
Bookkeeping process consists of the following steps:
- Identifying a financial transaction
- Recording a financial transaction
- Preparing a ledger account
- Preparing trial balance
What is Accounting?
Accounting is the systematic process of recording, measuring and communicating information about the financial transaction taking place in a business. Accounting helps in determining the financial position of a firm and present the same to stakeholders.
It helps a business in the short and long term decision making and also conveys the credibility of a company to the market.
It is also known as the language of business.
The purpose of accounting is to provide a clear view of financial statements to its users, which includes investors, creditors, employees, and government.
Let us look at the most important points of difference between bookkeeping and accounting in the following table:
| Bookkeeping | Accounting |
| Definition |
| Bookkeeping deals with identifying and recording financial transactions only | Accounting refers to the process of summarising, interpreting and communicating the financial data of an organisation. |
| Decisionmaking |
| Data provided by bookkeeping is not sufficient for decision making | Management can take important decisions based on the data obtained from accounting |
| Preparation of Financial Statement |
| Not done in the case of bookkeeping | Financial statements are a part of the accounting process |
| Analysis |
| No analysis is required in the bookkeeping | Accounting analyses the data and creates insights for the business |
| Persons Involved |
| The person concerned with bookkeeping is known as a bookkeeper | The person concerned with accounting is known as an accountant |
| Determining Financial Position |
| Bookkeeping does not show the financial position of a business | Accounting helps in showing a clear picture of the financial position of a business |
| Level of Learning |
| No high-level learning required | High-level learning required for understanding and analysing accounting concepts |
This article will help the students of Commerce in developing an understanding of the differences between bookkeeping and accounting. Stay tuned to BYJU’S for more such interesting concepts.
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FAQs
Simply put, bookkeeping is more administrative, concerned with accurately recording financial transactions. Accounting is more analytical, giving you strategic insights into your business's financial health based on bookkeeping information.
What is the difference between bookkeeping and accounting short answer? ›
Bookkeeping involves recording financial transactions, while accounting interprets, analyzes, and reports these transactions. Bookkeeping is the foundation of accounting, focusing on day-to-day activities, while accounting has a broader scope and prepares financial statements.
What is the difference between an accountant and a bookkeeper? ›
While your accountant will offer financial insights, your bookkeeper is responsible for keeping your finances organized by recording all transactions, including sales and expense receipts, on a day-to-day basis as part of your accounting process, including: Payments made.
Is bookkeeping easier than accounting? ›
Accounting often requires more education than becoming a bookkeeper, where most accountants hold undergraduate or graduate degrees or even MBAs in accounting, economics, or finance.
What is the difference between accounting and bookkeeping quizlet? ›
What is the difference between accounting and bookkeeping? Accounting is a system for measuring, processing and communicating financial information. Bookkeeping is a procedural element of accounting.
What comes first accounting or bookkeeping? ›
Bookkeeping is the first part of the accounting process, so the work of a bookkeeper and accountant often overlaps. Bookkeeping focuses on recording and organising financial data, while accounting is the interpretation and presentation of that data.
What pays more, accounting or bookkeeping? ›
Accountants have higher salary and growth expectations than bookkeepers. To maximize earning potential and secure long-term job stability, it's worth pursuing a career as an accountant.
Do I need accountant or bookkeeper? ›
If you are happy to do your own transaction recording of invoices, receipts, stock and so on, you may not need a bookkeeper. If you have a limited company, you'll need an accountant to submit your Corporation Tax return as this can only be done using specific software.
Is a full charge bookkeeper the same as an accountant? ›
While full charge bookkeepers are not CPAs, they can help prepare monthly and quarterly taxes. Their returns get submitted to your CPA for review, to get tax advice, and process tax returns. Reducing the time your CPA needs to spend working on your taxes should translate to a significant cost savings.
Does a bookkeeper need more accounting skills than an accountant? ›
No, a bookkeeper doesn't need more accounting skills than an accountant. Both roles involve different aspects of financial management and require different skill sets and expertise.
A CPA Can File Reports with the SEC
All public companies must prepare financial reports according to a standard set by GAAP and then file these reports to the SEC. A CPA can audit and review financial statements, provide reports to the SEC, something a general accountant cannot do.
What is the hardest part of bookkeeping? ›
The Internal Impasse: Juggling Priorities and Deadlines
They might be responsible for accounts payable and receivable, payroll processing, bank reconciliations, and generating financial reports — all on top of handling client inquiries and staying updated on regulations. Time management becomes a critical skill.
Is a bookkeeper cheaper than an accountant? ›
Bookkeepers charge lower fees for their services than accountants. So it's not a bad idea to hire a bookkeeper first to get those services at minimum and then hire an accountant later to do the taxes. Using an employee cost calculator can also help you manage expenses effectively.
What are 2 differences between bookkeeping and accounting? ›
Bookkeepers and accountants sometimes do the same work, but have a different skill set. In general, a bookkeeper's role is to record transactions and keep you financially organized, while accountants provide consultation, analysis, and are more qualified to advise on tax matters.
What is an important difference between bookkeepers and accountants? ›
Bookkeeping vs accounting (comparison)
There's plenty of overlap between the two tasks – especially as both sets of professionals have expanded the services they offer – but there are important differences. Bookkeeping covers data entry to strategy. Accounting covers reporting, taxes and strategy.
Which of the following differentiates between a bookkeeper and an accountant? ›
If you're looking for someone to help you keep track of daily expenses, help with payroll, or create invoices, you may need a bookkeeper. If you need help filing your taxes, solving long-term financial questions, or planning for your future, that may be better suited to an accountant.
What is bookkeeping and accounting in short notes? ›
Bookkeeping is the process of recording your company's financial transactions into organized accounts on a daily basis. It can also refer to the different recording techniques businesses can use. Bookkeeping is an essential part of your accounting process for a few reasons.
What qualifications do I need to be a bookkeeper? ›
If you want to apply for jobs directly, you may find some employers ask for up to 5 GCSEs at grades 9 to 4 (A* to C), including maths and English. An A level in business studies, maths, economics or equivalent qualifications could also be useful.
Is accounting also known as bookkeeping? ›
Book-keeping and accounting are different from each other. Bookkeeping is an important part of accounting. Accounting is broader than book-keeping. Accounting includes a design of accounting systems which book-keepers use for the preparation of financial statements, audits, cost studies, income-tax statements, etc.
