Difference Between Bookkeeping and Accounting

Definepedia avatar

Definitions


The part of accounting that is concerned with recording data is often known as bookkeeping – Frank Wood

 

Bookkeeping is the daily operation of an accounting system, which involves recording and classifying routine transactions – Meigs & Meigs


 


{tocify} {$title=Table of Contents}



R.N. Carter says that “Book-keeping is the science and art of correctly recording in the books of accounts all those business transactions that result in the transfer of money or money’s worth.”

 

A. W. Johnson says that “Accounting may be defined as the collection, compilation and systematic recording of business transactions in terms of money, the preparation of financial reports, the analysis and interpretation of these reports and the use of these reports for the information and guidance of management”


 

The main differences between bookkeeping and accounting are that bookkeeping is primarily used to record financial transactions. Other hand, accounting is used to analyze, interpret, and report on financial data.

Also, bookkeeping is not usually required to generate financial statements, whereas accounting is essential to generate thorough financial statements. Bookkeeping is the process of recording.

Accounting refers to the process of understanding, classifying, analyzing, reporting, and summarizing financial data.





Basic Types of Bookkeeping

Single-entry bookkeeping has one entry per transaction, while double-entry bookkeeping has two entries per transaction—a debit and a credit. The debit is recorded in one account while the credit is recorded in another.


Single-entry bookkeeping only uses one account per transaction, whereas double-entry bookkeeping uses two accounts.

Double-entry bookkeeping is more accurate than single-entry bookkeeping. Because it provides a complete record of each financial transaction.


Tasks involved in bookkeeping include recording financial transactions, and creating financial statements. And managing accounts receivable and accounts payable.





AspectBookkeepingAccounting
FocusRecording and maintaining daily financial transactionsAnalyzing and interpreting financial data
ScopeTransactional in nature, primarily focused on record keepingAnalytical in nature, primarily focused on generating insights
Level of AnalysisDetail-oriented, with a strong understanding of softwareAnalytical, with a strong understanding of financial principles and laws
Skill SetBasic math skills, attention to detail, familiarity with bookkeeping principles, software proficiencyStrong analytical and critical thinking skills, understanding of financial statements and laws, ability to provide financial advice
Education RequirementsGenerally no formal education requirements, although some training or certification may be helpfulBachelor’s degree in accounting or related field, Certified Public Accountant (CPA) certification preferred
Career ProgressionLimited growth potential, may lead to accounting positionsAdvancement opportunities into management or specialized accounting roles
SalaryGenerally lower than accounting positionsGenerally higher than bookkeeping positions
TimeframeDay-to-day management of financial transactionsPeriodic reporting, analysis and forecasting
Legal ResponsibilitiesNo legal responsibilitiesSome legal responsibilities, such as tax preparation and regulatory compliance
Financial StatementsPrepares financial statements, such as balance sheets and income statementsAnalyzes financial statements to provide insights and advice

Leave a Reply

Your email address will not be published. Required fields are marked *