The term bookkeeping and accounting may sound scary or even worrying, especially if you did not take an accounts subject in school or university. Although they are of different term, they are in the same category (both have something to do with keeping financial records) and can be easily differentiated even if you just scratch the surface of the terms. Let’s find out more about the differences in these terms, shall we?
Bookkeeping, or sometimes known as record keeping, is a term used for the action of putting a record on any financial infrastructure of an entity. Be it for an individual or for a business, bookkeeping is an important activity for both. This term is a necessary subset of accounting, since whatever that is recorded in the journals or ledgers will be used for the final process of accounting.
It surrounds the process of accumulating, organizing, storing as well as accessing the financial information base of the entity for two very basic purposes, which are:
- Facilitating the daily operations of the entity
- Preparing financial statements, tax return, and internal reports for the managers
The act of processing the recording in a chronological order, jotting down any transaction details of the business entity daily, contributes in forming the accounting information. The process is done in a meticulous way that is complete, accurate and timely. It needs to be done this way and there is a quality control to maintain it, called the internal control.
On the other hand, accounting is a much broader term as it touches many other processes as it domains the whole design of the bookkeeping system. It establishes a control that makes sure the entire system works well in every aspect and thoroughly analyzes and verifies the whole recorded information. Accountants pattern all internal controls for the bookkeeping system and these minimize any errors in recording the large number of activities that an entity engages over a period of time.
Accounting bounds the problem in measuring the function of financial reporting of values as well as performance measures to those who need the info. These reports are gathered from the information accumulated from the bookkeeping process such as the financial statement and tax returns. Business managers as well as investors are some of those who find great importance in depending on the performance and conditions of the activity of the financial reports information.
With this, we know that the action of bookkeeping helps a lot in the overall processing of accounting, as these two help in communicating with stakeholders or other interested organizations.