We sometimes use the words bookkeeping and accounting synonymously. Nevertheless, it is in fact only one element of the accounting process that deals with both transaction reporting.
What is Bookkeeping?
It is the daily recording of financial transactions and business-related records. This helps to ensure that records of the individual’s financial transactions are precise, updated, and complete. Hence, accuracy is crucial to the operation.
It contains the details which are used to make accounts. It’s a distinct operation, occurring within the wider accounting framework.
Each transaction should be registered, whether it is a matter of buying or selling. There are also defined mechanisms that are referred to as “quality controls” to ensure timely and precise details.
Why it matters?
Although it could appear obvious, thorough, and accurate bookkeeping is important for all businesses. Simply put, with the addition of taxation, income, credit, and savings, it is rapidly becoming more complicated.
Monitoring a business ‘ financial transactions is the real aim of it, which ensures you can maintain an up-to-date record of actual incoming and outgoing money, money owed by clients and the company, and more.
Difference between Bookkeeping and Accounting
|Definition||It usually involves the identification, measuring, and recording of financial transactions||It is the method of summarizing, analyzing and communicating financial transactions that were recorded in the ledger|
|Decision Making||Management can not make a final decision relying on the bookkeeping data||The management will take important business judgments according to the data given by a accountants|
|Objective||The aim is to record all the transaction in a proper manner||The main goal is to determine the financial position and convey the details to the appropriate authorities|
|Preparation of Financial Statements||Not prepared in this process||Financial statements are prepared|
|Skills||Not any special skill set needed||Accounting is complex and needs analytical skills|
|Analysis||this method doesn’t need any analysis||Accounting gathers information from bookkeeping to evaluate and analyze the information and afterward submit this into reports|
|Types||Single entry and double-entry are two types of bookkeeping||The accounting department manages the expenditures of a corporation and schedules applications for loans|