When it comes to managing the financial aspects of a business, two terms often come up: Bookkeeping and Accounting.
While these terms are sometimes used interchangeably.
They are two distinct functions that play different roles in the financial management of an organisation.
In this article, let us explore the difference between bookkeeping and accounting and how it helps business success.
Table of Contents
What Is Bookkeeping?
Bookkeepers are responsible for categorising these transactions into different accounts, such as:
- Cash,
- Accounts
- Payable,
- Accounts receivable, and
- Inventory.
As a result, the bookkeepers ensure that all financial data is entered into the books and organised systematically.
The primary goal of bookkeeping is to track a business’s financial activity daily.
Bookkeepers use various tools and software to record transactions and maintain financial records.
Bookkeepers generate financial reports, such as income statements and balance sheets.
These reports provide an overview of the business’s financial health. These reports are essential for:
- Monitoring cash flow,
- Tracking expenses, and
- Preparing tax returns.
What Is Accounting?
Accounting goes beyond bookkeeping.
Accounting involves a more comprehensive analysis of a business’s financial information.
Accountants use the data provided by bookkeepers to:
- Analyse financial performance
- Interpret financial performance and
- Report the financial performance of a business.
Accountants are professionals with a more profound knowledge of:
- Financial principles,
- Regulations, and
- Standards.
These help accountants provide valuable insights and advice to business owners and stakeholders.
Accountants perform tasks such as:
- Budgeting,
- Strategic planning and
- Financial forecasting,
Thus, accountants analyse financial statements to identify trends, patterns, and areas of improvement. The accountants are accountable for
- Auditing
- tax planning and
- Ensuring financial records are accurate.
The Difference Between Bookkeeping And Accounting
One way to understand the difference between bookkeeping and accounting is to:
Think of bookkeeping as the foundation and accounting as the analysis.
Bookkeeping sets the stage by capturing and organising financial data. At the same time, accounting takes that data and transforms it into valuable insights.
Bookkeeping vs Accounting:
| Bookkeeping | Accounting |
| Scope | |
| Bookkeeping focuses on the recording and organising of financial transactions. | Accounting involves the analysis and interpretation of financial data. |
| Level of Detail | |
| Bookkeeping provides a detailed record of financial transactions. | Accounting looks at the bigger picture by analysing and interpreting the financial data. |
| Timeframe | |
| Bookkeeping is an ongoing process that needs to be performed regularly to ensure accurate and up-to-date financial records. | Accounting is often done periodically (monthly, quarterly, or annually) to prepare financial statements and analyse financial performance. |
| Skillset | |
| Bookkeeping requires attention to detail and proficiency in recording financial transactions accurately. | Accounting requires a deeper understanding of financial principles, analysis techniques, and the ability to provide strategic financial advice. |
| Analysis | |
| The process of bookkeeping does not require any analysis. | Accounting uses bookkeeping information to analyse the data and compile it into reports. |
| Preparation of Financial Statements | |
| Preparing financial statements is not part of the Bookkeeping process. | Financial statements are prepared during the accounting process. |
The Bottom Line
Bookkeeping and accounting are two vital professions that work hand in hand to manage the financial aspects of a business.
While bookkeeping focuses on recording and organising financial transactions, accounting involves analysing and interpreting financial data.
Thus, both are essential for accurate financial reporting, compliance, and strategic decision-making.
Stay tuned with Regenesys Business School and discover the exciting possibilities within accounting science!
Explore more about Regenesys’ Bachelor of Accounting Science course. Learn more about the accounting science job, salary packages and more.
Click here to improve your capabilities and professional knowledge in accounting science. Learn more about the accounting science, accounting science Regenesys modules, and accounting science job opportunities.
FAQs on What Is The Difference Between Bookkeeping And Accounting?
What is the benefit of Bookkeeping?
Answer: Bookkeeping provides the foundation of accurate and up-to-date financial records for accounting analysis.
What is the benefit of Accounting?
Answer: Accounting helps businesses understand their organisation’s financial health and make informed decisions based on that information.
What are the roles of Bookkeeping?
Answer: Bookkeeping tasks typically include:
Recording daily transactions,
Maintaining general ledgers and
Reconciling bank statements.
What skills are required for Bookkeeping and Accounting professionals?
Answer: Bookkeeping professionals do not require any particular skill set.
Accounting professionals require special skills due to their analytical and complex nature.
What jobs can you get with a Bachelor of Accounting Science course?
Answer: A bachelor of accounting science course will prepare you for various accounting science job opportunities.
Below are some top accounting science jobs graduates can earn upon successfully completing a bachelor of accounting science course.
These accounting science jobs include
Loan Officer,
Budget Analyst,
Staff Accountant,
Internal Auditor,
Financial Analyst,
Management Accountant.
