Bookkeeping and accounting are the essential parts of the business. Every large business needs a bookkeeper and an accountant to manage its finance. In this blog post we will distinguish between bookkeeping and accounting.
Bookkeeping comes before accounting. It is the starting point of the whole accounting process. It creates base for accounting. It is the process of recording daily business transactions in the books of account in a consistent way. It is the primary stage of recording. It does not provide complete picture of financial condition of a business. A person who is responsible for bookkeeping is known as bookkeeper. Following are the responsibilities of bookkeeper:
- Preparing general journal (recoding daily business transactions).
- Setting up general ledgers. (classification of business transactions)
- Issuing invoices to customers.
- Receiving invoices from vendors.
- Receive cash from customers.
- Pay cash to vendors.
- Processing petty cash transactions.
- Completing payroll.
Bookkeepers’ responsibilities are less complex and are concerned with entering all the necessary information properly. They assist accountants in preparing financial reports like income statement, balance sheet and cash flow by providing summary and documents of the recorded business transactions.
Accounting begins where bookkeeping ends. It is the process of recording, classifying, summarizing and analyzing of financial data. It is wider concept than bookkeeping. It provides complete picture of the financial position of a business. It provides information for managerial decision making. A person who maintains account is called accountant. He sets up the procedure which is followed by bookkeepers. Following are the services offered by an accountant:
- Preparing un-adjusted trial balance.
- Making adjusting entries.
- Preparing adjusted trial balance.
- Preparing income statement.
- Preparing balance sheet.
- Preparing cash flow statement.
- Making closing entries.
- Preparing post-closing trial balance.
- Making reversing entries.
- Analyzing costs of operation.
- Creating budgets.
- Taxation planning and advice.
Bookkeeping stresses on the recording of business transactions while accounting is all about summarizing the recorded transactions. Bookkeeping and accounting may appear to be the same profession to an untrained eye. This is so because both bookkeepers and accountants deal with financial data. To enter into either profession, you must have the basic knowledge of accounting.