Bookkeeping and accounting are two functions which are extremely important for every business organization. In the simplest of terms, bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data.
Bookkeeping and accounting may appear to be the same profession to an untrained eye. This is because both accounting and bookkeeping deal with financial data, require basic accounting knowledge, and classify and generate reports using the financial transactions. At the same time, both these processes are inherently different and have their own sets of advantages. Read this article to understand the major differences between bookkeeping and accounting.
Bookkeeping vs Accounting – 8 Major Differences
A major misconception regarding bookkeeping vs. accounting is that both are considered to be one profession. Though they seem to be very similar, there are some striking differences between the two. To resolve this confusion, we have listed down accounting vs bookkeeping differences here –
Bookkeeping is mainly related to identifying, measuring, and recording, financial transactions
Accounting is the process of summarizing, interpreting, and communicating financial transactions which were classified in the ledger account.
- Decision Making
The objective of bookkeeping is to keep the records of all financial transactions proper and systematic
The objective of accounting is to gauge the financial situation and further communicate the information to the relevant authorities
- Preparation of Financial Statements
- Skills Required
Bookkeeping doesn’t require any special skill sets
Accounting requires special skills due to its analytical and complex nature
Basically there are two types of bookkeeping – Single entry and double entry bookkeeping
The accounting department does preparations of a company’s budgets and plans loan proposals
- Bookkeepers and Accountants
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