Bookkeeping vs Accounting: What’s the Key Difference?
Bookkeeping and accounting are two prime branches of accountancy which are often used interchangeably. However, these concepts are completely different as one deals with recording financial transactions, whereas another reports and summarizes any business financial data. If you are a business owner and want to know about the difference between bookkeeping and accounting in Brunswick, OH, we have got you covered. This article highlights Bookkeeping vs Accounting and its key differences. Let’s dive in!
What is Bookkeeping and its Activities?
In simple terms, bookkeeping is the practice of maintaining accounting books properly and systematically. Bookkeeping includes recording financial transactions or activities like purchases, sales, payments, or expenses on an everyday basis in different books like ledgers, journals, and cash books.
Some key activities of bookkeeping include:
- Bookkeeping records all financial transactions like expenses, purchases, sales, and payments in an organized manner.
- All transactions are classified into different categories like assets, liabilities, revenue, and expenses, which ensures easy data organization.
- Bookkeepers promote a double-entry accounting system where credit and debit sides include equal and opposite entries.
- Bookkeepers are involved in maintaining the ledger.
What is Accounting and its Activities?
Accounting is a core function in every business, which includes systematic recording, interpretation, analysis, and reporting of all financial information and transactions that happened in a year. This provides an accurate and clear picture of your business’s financial health and overall performance. Some key aspects of accounting are financial recording, double-entry system, general ledger, financial statements, and analysis.
Some key activities of accounting include:
- Accounting records all financial transactions related to expenses, purchases, sales, investments, loans, and other financial activities.
- Each financial transaction is classified into different accounts or categories like assets, liabilities, equity, revenue, and expenses.
- All financial transactions are recorded under a general ledger, which provides a complete history of all financial activities.
- Accountants help with financial forecasts and budgeting and help businesses to make short and long-term goals.
Bookkeeping vs Accounting: What’s the Key Difference (Table)
|Definition||Bookkeeping records all financial transactions.||Accounting measures and records all financial transactions of a year.|
|Objective||The primary aim is to manage original accounting books.||The primary aim is to record and interpret yearly transactions.|
|Scope||Bookkeeping has a limited scope.||Accounting has a wide scope.|
|Skill required||No special skills are required.||Since it requires analytical skills, specialized skills are required.|
|Level of work||Low level of work.||Low to medium level of work.|
Bookkeeping and accounting are closely related but have different functions in the field of business and finance management. However, they are important for any business’s financial position.
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