The records of the financial transactions are important for any business. They prove the reliability of the organization and also increases the transparency of the money inflow and outflow. Book keeping 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 lot of difference in between these two terms.
Book keeping 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, book keeping involves saving the hard copy of the proof of the transaction.
Unlike book keeping, accounting involves a deeper study of the financial transactions. It involves scrutinizing all the financial transactions including their recording, analysis, interpretation, reporting, and summary. Which means book keeping is just a sub space of accounting. It is the first step for better accounting. Without book keeping, accounting becomes tougher. Accounting is wider and deeper than book keeping.
Book keeping needs a 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 book keeper. Often, employers employ trustworthy persons as book keepers, and hence book keepers work very close to the company
Now-a-days, companies are preferring personnel with basic knowledge on book keeping and accounting as book keepers.
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 number of transactions, checking the balance sheet, income, expenses, salaries, taxes, investments and profit details, etc. may not be feasible for a single person. Here’s where companies recruit accountants for.
A professional should be qualified from a recognized authority to be qualified as an accountant. Also, accountants hold wider knowledge about investments, profits and advise towards better profits for the company.
It means, book keepers handle the recording part of the accounting, while accountants deal with the whole process of accounting.
Book keepers 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.
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 taking their decision about investing in a company or to decide whether a company is financially sound.