In this tutorial, we will learn about bookkeeping is an activity concerned with the recording of financial data regarding business operations.
It involves the estimation of profit earned by the firm. It only covers the procedural record of transactions in monetary terms in a meaningful and orderly manner—bookkeeping procedures governed by the end product, the financial statements. Here in India, financial statements mean Profit and Loss Account and Balance Sheet.
It’s a clerical job, whereas accounting has managerial. A bookkeeper is only responsible for keeping all business records of a minor segment, such as the position of customer’s accounts. The primary purpose of bookkeeping was to find the correct amount of income and expenditure under each head.
Bookkeeping is the work of a bookkeeper, who records the day-to-day financial transactions of a business. They usually write the daybooks and document each financial transaction, whether cash or credit, into the correct day-book- that is, petty cash book, suppliers ledger, customer ledger, etc.- and the general ledger. After that, an accountant can create financial reports from the information recorded by the bookkeeper.
Treated proclamations and expense reports are all a player in accounting. Bookkeepers don’t share their perspective. Others consider accounting to be constrained to recording exchanges in diaries term accounting implies distinctive things to various individuals:
A few people feel that accounting is the same as bookkeeping. They expect that staying with as books and setting up its money into books and after that posting the sums into records. After the amounts posted, the accounting has finished, and a bookkeeper with a professional education assumes control. The bookkeeper will make conforming sections and afterward set up the money related proclamations and different reports.
At the moderate size and more prominent companies, the term accounting may be truant. Regularly, organizations have bookkeeping offices staffed with the representatives who process creditor liabilities, records of sales, finance, and so on. One or more bookkeepers will administer the bookkeeping representatives.
The distinction between Accounting and Bookkeeping
Some people mistake bookkeeping and accounting to be synonymous terms, but there are very different from each. Accounting is a broad subject, and auditing is a small part of it. Bookkeeping is the recording phase, while accounting is concerned with summarizing steps interpreting the results.
The following Bullet points will help you to distinguish between Bookkeeping and Accounting.
- It is a process concerned with recording transactions, whereas, accounting is a process concerned with summarizing the recording transactions.
- It constitutes a base for accounting, whereas accounting is considered as a language of the business.
- It does not consider financial statements, whereas, In Accounting, financial statements are prepared based on bookkeeping.
- It doesn’t help to take managerial decisions whereas accounting helps the management to make all the administrative decisions
- There is no sub-field of bookkeeping. Whereas, there are several sub-fields like financial accounting, management accounting, etc.
- It does not help to ascertain the firm’s financial position, whereas its main objective is to determine the economic situation.