The records of the financial transactions are important for any business. They prove the reliability of the organization and also increase the transparency of the money inflow and outflow. Bookkeeping and accounting are two terms that deal with the records of money being transactions in and around a company.
How Book Keeping and Accounting Differs
For those who are novice to this field, bookkeeping and accounting may seem synonymous to those who are novice to this field. However, there exists a lot of difference between these two terms.
The Process
Bookkeeping is the task of recording all the financial transactions of a company – including receipts, challans, invoices, payments to third parties, donations, funds received, and any amount that has either gone in or out of the company, bookkeeping involves saving the hard copy of the proof of the transaction.
Unlike bookkeeping, accounting involves a deeper study of financial transactions. It involves scrutinizing all the financial transactions including their recording, analysis, interpretation, reporting, and summary. Which means bookkeeping is just a sub-space of accounting. It is the first step for better accounting. Without bookkeeping, accounting becomes tougher. Accounting is wider and deeper than bookkeeping.
The Expertise
Bookkeeping needs deep attention to detail. One should be meticulously careful not to miss any tiny detail about the company’s transactions. No specific qualification may be needed to become a bookkeeper. Often, employers employ trustworthy persons as bookkeepers, and hence bookkeepers work very close to the company
owners.
Nowadays, companies prefer personnel with basic knowledge of bookkeeping and accounting as bookkeepers.
Also Read: What Accounting Conservatism is All About
On the other hand, the person who does accounting tasks depends on the size of the company. For smaller businesses, the company owners take care of the accounting reports. However, for bigger companies with many employees and several transactions, checking the balance sheet, income, expenses, salaries, taxes, investments profit details, etc. may not be feasible for a single person. Here’s where companies recruit accountants.
A professional should be qualified from a recognized authority to be qualified as an accountant. Also, accountants hold wider knowledge about investments, and profits and advise towards better profits for the company.
It means, bookkeepers handle the recording part of the accounting, while accountants deal with the whole process of accounting.
The Role
Bookkeepers take care of dates of payments, receipts, ensures that all such transactions are done within the specified date. They also may take care of attendance of the employees and their in and out timings.
Accountants have a wider role. They analyse each and every financial transaction and frame a business report based on accounting principles. They analyse the financial and market conditions outside and advice the company owners to take the company ahead into profits.
For example, if book keepers are concerned about paying salaries to the staff and recording the bonuses given etc., the accountant files the taxes, checks for reimbursements and insurances and financial forecasting for the company in the coming year, etc. It means the accountant has a bigger picture to visualize and perform.
Often, book keepers serve as subordinates to accountants and provide them with all the recorded financial transactions and their proofs.
Decision Making
Book keeping is never a proof of a company’s financial status. It is just a record. On the other hand, accounts of a company are legally a proof of company’s financial status and can be inspected or audited anytime by any authorised authority.
Thus, other companies, investors, and clients always rely on accounts for make their decision about investing in a company or to decide whether a company is financially sound.