Difference between Accounting and Bookkeeping

The terms bookkeeping and accounting are considered as synonyms. However, there are lots of differences between these two terms. Bookkeeping is concerned only with the recording of financial transactions, while accounting is concerned with recording, classifying, summarizing, and communicating results thereof to the users of financial statements. Transactions recorded during bookkeeping are base for carrying out accounting activities.

Let’s go through the definition of bookkeeping & accounting and understand the major difference between accounting and bookkeeping.

Difference between accounting and Bookkeeping

Definition of Bookkeeping

Bookkeeping is an activity concerned with recording & classification of financial transactions related to business operations regularly in a systematic manner.

Following activities are performed during the bookkeeping process:-

  • Identification of financial transactions related to business
  • Recording of transactions in books of accounts
  • Classification of recorded transactions to the appropriate ledger accounts
  • Preparation of trial balance.

Definition of Accounting

Accounting is a process of recording, classifying, summarizing, analyzing, Interpreting business transactions or events of a financial character, and communicating the results thereof to the Users of Financial Statements.

Following are 6 steps for the accounting process:-

  • Recording
  • Classifying
  • Summarizing
  • Analyzing
  • Interpreting
  • Communicating

On reading the above 6 steps you will notice that the first 2 steps (i.e. recording and classification) are also part of the Bookkeeping process. Hence, it can be said that the bookkeeping is a subset of accounting.

Bookkeeping is subset of accounting

Now lets check the major difference between accounting and bookkeeping.

Difference between Accounting and Bookkeeping

BookkeepingAccounting
MeaningBookkeeping is mainly concerned with the identification, Recording & classifications of business transactions.Accounting includes recording, classifying, Summarizing of financial transactions, Interpreting and communicating results thereof to users of financial statements.
Person ResponsibleBookkeeping is performed by bookkeeper as well as accountantsAccounting can only be performed by professional accountants.
Preparation of Financial StatementsThe financial statements are not prepared under the bookkeeping processFinancial statements are prepared under the accounting process based on data available from Bookkeeping records
Decision MakingManagement can’t make decisions based on bookkeeping recordsManagement makes decisions based on accounting records.
Sub-fieldsThere are no sub-fields of bookkeepingAccounting has many sub-fields such as management accounting, Financial accounting, Human resource accounting, Cost accounting, etc.
Financial position of BusinessThe financial position of Business cannot be determined with the help of bookkeeping recordsAccounting records depict the financial position of business
Records
Prepared/maintained
Journal, ledger, Trail balanceIncome statement (Profit and loss account), Cash flow statement, Balance sheet.

It can be mentioned that above stated difference between accounting and bookkeeping are just theoretical and will not prevail in practice as professional performing both the tasks can be same.

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