DIFFERENCE BETWEEN ACCOUNTING AND BOOKKEEPING
For a commoner, browsing through the financial industry can get a little hectic due to all the complicated jargon. People may misinterpret several things due to the lack of knowledge of the financial industry and the terms they use. One such example is the difference between accounting and bookkeeping. We may think that both these are the same, yet a few of us know they’re different. But, indeed, what is the difference?. Here’s a closer look at accounting and bookkeeping.
An in-depth explanation of bookkeeping vs. accounting, their differences and similarities
As its name suggests, bookkeeping as is simply the process of keeping or storing financial books that include details about financial events and transactions. The books here are nothing more than accounting books, where you input the financial data extensively. To be more precise, bookkeeping is a part of accounting. Bookkeeping includes:
- Entering the data of voucher and invoice details into the ERP systems.
- Storing the payment details made by customers.
- Recording the payment information made to vendors.
- Effectively processing the information about payroll.
Accounting can be defined as a process that involves inputting, categorizing, and interpreting the financial information of a business, or an economic unit, which is labeled as an individual legal entity. Accounting information is utilized for a wide range of purposes. Accounting basically starts where the bookkeeping ends. Some of them are:
- Preparing ledger accounts, trial balance, etc.
- Concluding financial statements.
- A brief analysis of financial information.
- Accountants and bookkeepers work with financial data
- They share the common goal of improving your financial health
- Their roles sometimes overlap in small businesses due to the advent of bookkeeping software that can compile financial statements
- Both require basic accounting knowledge to enter either profession
- Both are tax compliant
|– Requires a bachelor’s degree (accounting or applicable finance degree)|
– Qualifies for additional certifications. For example, accountants can obtain the Certified Public Accountant (CPA) designation by passing the Uniform Certified Public Accountant exam and having professional experience.
– Analyzes, interprets and provides subjective advice based on the data
– Assesses the information from the ledger to prepare the financial statements
– Files tax returns
|– Needs 2 to 4 years of experience and an associate degreeDoes not qualify for extra certifications|
– Records and classifies financial transactions
– Prepares a bank reconciliation and the general ledger
– Tracks income and expenses for tax season
By now, you may have got the idea about how accounting and bookkeeping are two different things, yet both are related and used in conjunction. Bookkeeping must be done accurately, in order for the accounting to go smoother.