Many people use the word bookkeeping and accounting
interchangeably, but you should know that both are different parts of
accounting. You can consider bookkeeping as a stepping stone for the further
accounting process or bookkeeping as the initial stage of accounting.
Having an in-depth knowledge of the various functions of
your finances is a vital part of a business strategy because it will allow you
to have a better look at your current business status. Without understanding
your finances, you will not be able to run your business properly. Moreover,
this practice will also help you to carry on with your various financial
processes in a much better way. Therefore, in this blog post, we will be
looking at the thin line which keeps the bookkeeping and accounting apart but
also keeps it woven into the same function of finance.
What is bookkeeping?
Talking in layman’s language, bookkeeping is simply the
practice of recording the financial transactions and is obviously a part of the
process of accounting. The financial transactions which are recorded include
purchase, sales, receipt, etc. The practice of bookkeeping involves extensive
data input and is commonly known as the practice of maintaining the financial
books and by books we mean the book of accounts.
What is accounting?
It is the measurement, processing and communication of
financial information about entities such as firm and organizations. Talking in
layman’s language, it is a step by step process of identifying, measuring,
classifying, communicating and summarizing the financial information. So from
the above definition of accounting, you can see that accounting is a very broad
term. The practice of accounting gives profit and loss status of business for a
particular period of time and it also allows the owner to know the assets,
liabilities and equity.
The similarities
between bookkeeping and accounting
Bookkeeping and accounting may be different, but they are
the part of the same financial process and that’s why they have some
similarities as well. For example, records are an important part of both
bookkeeping and accounting, they both are the part of the same financial
process, etc. When you look at the financial operations of small businesses
then you will notice that the practice of bookkeeping is practiced more like an
accounting process rather than just a simple recording of transactions.
The differences
between bookkeeping and accounting
- The practice of bookkeeping is carried on by a bookkeeper while the process of accounting is carried on by an accountant.
- Bookkeeping is the subset of accounting while accounting is considered as the language of the business.
- Creation of financial statement is not a part of bookkeeping while the same is a vital part of accounting.
- The tools of bookkeeping include journals and ledgers while the tools of accounting include balance sheet, profit and loss, account and cash flow statement.
- No business decision can be taken on the basis of bookkeeping records while most of the major business decisions are taken on the basis of financial records.
Now, you must have understood the basic differences and
similarities between accounting and bookkeeping. This is very much important
for both financial knowledge and running your business smoothly. A non-professional
persona may use the two words interchangeably, but as a business owner, you
should know the differences.
If you are looking for managing your bookkeeping and accounting in an efficient way, then you can go for QuickBooks cloud hosting form Cloudwalks. The QuickBooks cloudhosting services provided by Cloudwalks can easily fit into your budget and can give you the advantage of the accounting software bundled with the power of cloud.
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