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Bookkeeping or Books of original entry is a science and art of recording all the business transactions that result in a transfer of money or money’s worth’ in the accounts books. Bookkeeping is a task concerned with recording and classifying financial data related to business operation in order of its occurrence. Bookkeeping and accounting are inseparable and there is a thin line to differentiate bookkeeping and accounting.
Accounting is a broad subject. It calls for a greater understanding of records obtained from bookkeeping and an ability to analyze and interpret the information provided by bookkeeping records.
Bookkeeping is the recording phase while accounting is concerned with the summarizing phase of an accounting system. Bookkeeping provides necessary data for accounting and accounting starts where bookkeeping ends.
The distinction between Bookkeeping and accounting can be tabulated as under:
S.No |
Bookkeeping |
Accounting |
1. |
Yield of bookkeeping is an input for accounting. |
The yield of accounting permits informed judgments and decisions by the user of accounting information. |
2. |
Purpose of bookkeeping is to keep a systematic record of transactions and events of financial character in order of its occurrence. |
Purpose of accounting is to find results of the operating activity of business and to report the financial strength of a business. |
3. |
Bookkeeping is a foundation of accounting. It is done by bookkeepers, who do not require any special skill or knowledge |
Accounting is considered as a language of business. Accountants, on the other hand, require special accounting knowledge and skills. |
4. |
The objective of bookkeeping is to summarize the cumulative effect of all economic transactions of business for a given period. This is done by maintaining permanent record of each business transaction with its evidence and financial effects on accounting variable. |
The objective of accounting is not only bookkeeping but also analysing and interpreting reported financial information for informed decisions. |
A bookkeeping software would be a great deal of help for small businesses who have a daily routine of keeping their books of accounts up-to-date. An intuitive bookkeeping software simplifies data entry, organises your vital information, provides reports, and allows accountants more access to important financial information about many aspects of the business.
Bookkeeping is a mechanical task which involves the following steps:
Bookkeeping is a process of recording and organizing all the business transactions that have occurred in the course of the business. Bookkeeping is an integral part of accounting and largely focuses on recording day-to-day financial transaction of the business.
The single-entry and double-entry bookkeeping systems are the two methods commonly used. While each has its own advantage and disadvantage, the business has to choose the one which is most suitable for their business.
To ensure the all the transactions are recorded and organized systematically, bookkeeping principles are applied. The following are the bookkeeping principles
Bookkeeping procedures are governed by the end product, the financial statements. And ‘financial statements’ includes profit and loss account and balance sheet including schedules and notes forming part of accounts. The three primary elements of bookkeeping software are; journal, ledgers and financial statements.
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