To a layman, book-keeping and accounting may seem to be one and the same, but that is really not the case. Both of them are important functions of any business; both deal with finance and both require the basic knowledge of accounting. But, there are a few technical differences between the two. Read on to find out what the distinguishing aspects are:
The Basic Difference
Simply put, bookkeeping involves recording of financial transactions, while accounting takes care of interpretation, classification, analysis, reports and summary of the same financial data.
Role in Management
Book-keeping alone is not enough for the management to take any decision, while the accounting data influences many of the critical decisions regarding the business.
The Main Purpose
While bookkeeping is important to have a complete and systematic record of all the transactions that have taken place, accounting has the onus of understanding the financial situation and communicating it to the relevant managers.
Bookkeeping does not deal with the preparation of financial statements, while it is an integral part of the accounting process.
Accounting needs analytical skills due to the nature of the work involving interpretation and reporting of data, while bookkeeping is pretty mechanical and straightforward.
Bookkeeping is generally of two types: single entry and double entry. Accounting has no types but covers a lot of details, which are finally used in preparation of budgets and financial plans, including loans and investments.
Accuracy and knowledge of finance is a key requirement for bookkeepers. They are generally supervised by an accountant who can eventually become a CPA (Certified Public Accountant) after acquiring enough experience and additional education.
Since both these have been a part of business scenarios for a long time, like everything else, they have gone through many changes. With the emergence of the variety of accountancy software capable of analyzing the bookkeeping data, the two are slowly getting merged and bookkeeping will soon be obsolete as an individual profession.
As the future becomes more technologically advanced, the knowledge of the two fields will have to be acquired by the professionals, but it will also become much easier. Bookkeepers will be able to take advantage and present their clients with additional services, including credit card reconciliation, payroll processing, and many more. At the same time, consultants are enjoying the benefits of the advancements in analytics, which have helped their services.