Bookkeeping and Accounting

Meaning of Bookkeeping

Bookkeeping is the process of collecting, recording, organising  all the financial transactions of a business. Bookkeeping is an essential part of accounting, and it focuses mainly on tracking a company’s day-to-day financial transactions. All the transactions are recorded in the books of accounts, including sales revenue, tax payments, interest earned, payroll as well as other operational expenses, investments, loans and so on. The accuracy of the total accounting process in a business is determined by how well bookkeeping is managed. As a result, bookkeeping guarantees that financial transaction records are up to date and, more crucially, accurate

Objectives of Bookkeeping

The following are some of the objectives of bookkeeping: 

1. Identifying Financial Transactions and Events.
2. Calculating the monetary value of transactions and events.
3. Recording specified financial transactions in accounting books, such as Journal or Subsidiary Books; and 
4. Classifying recorded transactions and events, such as posting them to ledger accounts.

Meaning of Accounting

Accounting is the process of recording, storing, retrieval, summarizing, and presenting financial transactions and position of a business in various reports and analysis. The data is mostly financial and expressed in monetary terms. Accounting is a measurement and communication process that is used to report on the actions of profit-making businesses. Accounting provides information that allows users of the data to make informed judgements and decisions relating to the activities of the business.

Bookkeeping and Accounting

Similarities

To the common eye, bookkeeping and accounting may appear to be the same job. Financial information is managed by both bookkeepers and accountants. Basic accounting knowledge is required for both professions. In smaller businesses, bookkeepers are generally in charge of more than just documenting transactions. They also use financial transactions to classify and create reports. They may lack the necessary education to do these jobs, but most accounting software automates reports and memorizes transactions, making transaction categorisation easier. An accountant may record a company’s financial transactions and handle the bookkeeping element of the accounting process.

Differences

Bookkeeper Credentials

Bookkeepers aren’t often required to have any formal schooling. Bookkeepers must be diligent in their job and educated about important financial matters in order to be successful. Typically, the bookkeeper’s work is overseen by either an accountant or the small business owner whose records they are handling. As a result, a bookkeeper cannot claim to be an accountant.

Accountant Credentials

A bachelor’s degree in accounting is often required to qualify for the title of an accountant. Finance degrees are frequently deemed suitable substitutes for persons who do not have a formal accounting degree. Accountants, unlike bookkeepers, can get further professional certifications. Accountants with sufficient experience and education, for example, may be eligible for the designation of Chartered Accountant (CA), which is one of the most prestigious accounting degrees. In order to become a CA, an accountant must pass different levels of  tests by ICAI and have professional accounting experience. The cost of an accountant is determined by these required certifications.

Conclusion

Both bookkeeping and accounting are responsibilities that are critical to a company but there is a difference to be made. The documentation of financial transactions is the responsibility of bookkeeping. Interpreting, classifying, analysing, reporting, and summarizing financial data are all functions of accounting. The primary difference between accounting and bookkeeping is that accounting needs data interpretation and analysis, whereas bookkeeping does not.