In a general scenario, Many of us mistake that book keeping and accounting are the same terms, but they are different. And also what is meant by book keeping and accounting?
Everybody performs some kind of economic activity in which a salaried person spends his salary to buy household provisions, clothing, etc; governments either central or state government, all are carrying some economic activities. Economic activities are performed through ‘transactions and events’. The transaction is to means ‘performance of an act, business,’ while events are consequences of a transaction.
So everybody wants to keep records of all transactions and events and it is used to make decisions.
Book keeping and accounting, mainly accounting discipline, have developed to serve this purpose as they deal with the measurement of economic activities.
What is Book keeping?
Book keeping is an activity related to recording the financial data of a business in a significant manner. It requires a suitable classification of transactions and events. A bookkeeper may maintain only records of the business or any segment. The essential idea behind maintaining book keeping records is to show the correct position of each head of income and expenditure.
Objectives of Book keeping:
- The complete recording of transactions
- Ascertainment of the financial effect on the business
Accounting is based on a careful and efficient book keeping system. A lot of information is needed for accounting which can be gathered from a proper record of the transactions. So, the proper maintenance of a book of accounts is essential for any business.
What is Accounting?
Accounting is known as the language of business as it is an art of recording, classifying, and summarizing in a significant manner in terms of money. It is a broad subject. The accounting process includes identifying events and transactions, recording, classifying and summarizing, analyzing, interpreting, and communicating.
Objectives of Accounting:
- Systematic recording of transactions
- Ascertainment of results of above-recorded transactions
- Ascertainment of financial position of the business
- Providing information to the users for decision making
- To know the solvency position
let us know some differences between them.
Differences Between Book keeping and Accounting:
|Book-keeping is the process of recording transactions.||Accounting is the process of recording, classifying, summarising, analysing, interpreting and communicating.|
|It is a base for accounting||Accounting is considered the language of business.|
|The whole process of financial statements can be formed from this.||Financial statements can be prepared on the basis of book-keeping.|
|Businesses cannot make decisions by depending on book-keeping.||Businesses can make decisions on the basis of these records.|
|There are no subfields||There are several subfields like cost accounting, financial accounting, human resources accounting etc;|
|The solvency of the business cannot be known||The solvency of the business can be known.|
So, when we compare, Many people wonder, “What’s the difference between book keeping and accounting?” The short answer is that bookkeeping is the recording of data and financial information, whereas accounting is the analysis, classification, and interpretation of this data. Accountants require more formal education and training than bookkeepers due to the analytical and complex nature of accounting.
Further related reading:
- Difference Between Single Entry System and Double Entry System
- Difference Between Cost Accounting and Financial Accounting