Top 8 Differences Between Bookkeeping and Accounting
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Bookkeeping and accounting are two functions which are extremely important for every business organization. In the simplest of terms, bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data.
Bookkeeping and accounting may appear to be the same profession to an untrained eye. This is because both accounting and bookkeeping deal with financial data, require basic accounting knowledge, and classify and generate reports using the financial transactions. At the same time, both these processes are inherently different and have their own sets of advantages. Read this article to understand the major differences between bookkeeping and accounting.
Bookkeeping vs Accounting - 8 Major Differences
A major misconception regarding bookkeeping vs. accounting is that both are considered to be one profession. Though they seem to be very similar, there are some striking differences between the two. To resolve this confusion, we have listed down accounting vs bookkeeping differences here -
1) Definition
Bookkeeping- Bookkeeping is mainly related to identifying, measuring, and recording, financial transactions
Accounting- Accounting is the process of summarizing, interpreting, and communicating financial transactions which were classified in the ledger account
2) Decision Making
Bookkeeping- Management can't take a decision based on the data provided by bookkeeping
Accounting- Depending on the data provided by the accountants, the management can take critical business decisions
3) Objective
Bookkeeping- The objective of bookkeeping is to keep the records of all financial transactions proper and systematic
Accounting- The objective of accounting is to gauge the financial situation and further communicate the information to the relevant authorities
4) Preparation of Financial Statements
Bookkeeping- Financial statements are not prepared as a part of this process
Accounting - Financial statements are prepared during the accounting process
5) Skills Required
Bookkeeping- Bookkeeping doesn't require any special skill sets
Accounting- Accounting requires special skills due to its analytical and complex nature
6) Analysis
Bookkeeping- The process of bookkeeping does not require any analysis
Accounting - Accounting uses bookkeeping information to analyze and interpret the data and then compiles it into reports
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7) Types
Bookkeeping- Basically there are two types of bookkeeping - Single entry and double entry bookkeeping
Accounting- The accounting department does preparations of a company's budgets and plans loan proposals
8) Bookkeepers and Accountants
Bookkeeping- Bookkeepers are required to be accurate in their work and knowledgeable about financial topics. Bookkeepers work is usually overseen by an accountant
Accounting- Accountants with sufficient experience and education can obtain the title of Certified Public Accountant (CPA)
The Shifting Landscapes of Bookkeeping and Accounting
Bookkeeping and accounting have been in existence since a very long time and both fields have seen a tremendous amount of change in the way the operations are carried out. This trend will continue in a similar fashion in the future too. Some of the upcoming trends in the field of accounting and bookkeeping include -
The line between accounting and bookkeeping is slowly diminishing. It is interesting to note that with the advent of accounting and bookkeeping software, some parts of accounting are being slowly absorbed into the bookkeeping process. At the same time, bookkeeping software is now capable of generating financial statements which were earlier part of the accounting process
While most businesses will still need a bookkeeper to keep the books, bookkeeping will become a lot more than just data entry, balancing bank ledgers, and reconciling bank statements. These functions will slowly diminish in the coming years and may even become obsolete, as most of the tasks will be handled by bookkeeping software
Newer technologies have persuaded bookkeepers and accountants to be open to the technological advancements and explore emerging software options. It is an opportunity for bookkeepers to support their clients through this change, presenting value-added services such as payroll processing, credit card reconciliation, etc. with the help of the latest software
More and more businesses are shifting their operations online, especially as smartphones and mobiles are becoming increasingly intuitive and easily available. Business owners want to access the data from anywhere in the world on different devices, and accounting and bookkeeping professionals are making sure the duly-generated reports are available online for their clients to access at all times
Consulting and advising corporations are taking full advantage of these new technologies and services due to the advancement of the analytical tools, making bookkeeping and tax preparation services more efficient and significantly cheaper
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Choose Flatworld Solutions for Hassle-free Bookkeeping and Accounting Services
We believe that Bookkeeping and accounting is a very important part of every business. Flatworld Solutions has been in this domain for over 18 years now and has served several clients across the world. Our team comprises of certified, professional accountants who provide the best services in the industry. Our bookkeepers and accountants are updated with the changing market scenarios and are skilled to work on emerging tools and technologies. By outsourcing your requirements to us, you can save about 50% of your costs and concentrate more on your core competencies.
If you have any kind of accounting and bookkeeping requirements, feel free to write to us or talk to one of our representatives and we will get back to you within 24 hours.