Many use the terms bookkeeping and accounting interchangeably, but the fact is the former is the first step to the latter, i.e. bookkeeping is the stepping stone of accounting. As far as the scope is of these two processes is concerned, Accounting is much wider and analytical than bookkeeping. Bookkeeping it is only a part of accounting, which creates a base for accounting.
Definition of Bookkeeping
The process of complete and systematic record keeping of the monetary transactions of an organization by the bookkeeper is known as bookkeeping. It is the activity of keeping full documentation of every single financial transaction of the entity to form a base for the accounting process. The purpose of bookkeeping is to disclose the correct picture of income and expenditure at the end of the accounting period.
Definition of Accounting
Accounting is simply a business language which provides information about the financial status of the organization. It is a complete procedure which starts from the recording of transactions and ends on reporting of the financial statements at the end of the financial year.
|BASIS FOR COMPARISON||BOOKKEEPING||ACCOUNTING|
|Meaning||Bookkeeping is an activity of recording the financial transactions of the company in a systematic manner.||Accounting is an orderly recording and reporting of the financial affairs of an organization for a particular period.|
|What is it?||It is the subset of accounting.||It is regarded as the language of business.|
|Decision Making||On the basis of bookkeeping records, decisions cannot be taken.||Decisions can be taken on the basis of accounting records.|
|Preparation of Financial Statements||Not done in the bookkeeping process||Part of Accounting Process|
|Tools||Journal and Ledgers||Balance Sheet, Profit & Loss Account and Cash Flow Statement|
|Methods / Sub-fields||Single Entry System of Bookkeeping and Double Entry System of Bookkeeping||Financial Accounting, Cost Accounting, Management Accounting, Human Resource Accounting, Social Responsibility Accounting.|
|Determination of Financial Position||Bookkeeping does not reflect the financial position of an organization.||Accounting clearly shows the financial position of the entity.|