Which of the following most clearly differentiates accounting and bookkeeping

In financial parlance, the terms bookkeeping and accounting are almost used interchangeably. However, these concepts are different. While bookkeeping is all about recording of financial transactions, accounting deals with the interpretation, analysis, classification, reporting and summarization of the financial data of a business.

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What is Bookkeeping?
What is Accounting?
Have A Look At The Table Below To See The Differences Between Bookkeepers And Accountants:
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What is Bookkeeping?

Bookkeeping is the process of systematic recording and classification of financial transactions of an organisation.

Bookkeeping is said to be the basis of accounting, whereas accounting forms a part of the broader scope in finance.

The most important focus of bookkeeping is to maintain an accurate record of all the monetary transactions of a business. Companies use this information to take major investment decisions.

The bookkeeper maintains bookkeeping records. Accurate bookkeeping is critical for business as it gives a piece of reliable information on the performance of a company.

Bookkeeping process consists of the following steps:

Identifying a financial transaction
Recording a financial transaction
Preparing a ledger account
Preparing trial balance

What is Accounting?

Accounting is the systematic process of recording, measuring and communicating information about the financial transaction taking place in a business. Accounting helps in determining the financial position of a firm and present the same to stakeholders.

It helps a business in the short and long term decision making and also conveys the credibility of a company to the market.

It is also known as the language of business.

The purpose of accounting is to provide a clear view of financial statements to its users, which includes investors, creditors, employees, and government.

Let us look at the most important points of difference between bookkeeping and accounting in the following table:

Bookkeeping	Accounting
Definition
Bookkeeping deals with identifying and recording financial transactions only	Accounting refers to the process of summarising, interpreting and communicating the financial data of an organisation.
Decision making
Data provided by bookkeeping is not sufficient for decision making	Management can take important decisions based on the data obtained from accounting
Preparation of Financial Statement
Not done in the case of bookkeeping	Financial statements are a part of the accounting process
Analysis
No analysis is required in the bookkeeping	Accounting analyses the data and creates insights for the business
Persons Involved
The person concerned with bookkeeping is known as a bookkeeper	The person concerned with accounting is known as an accountant
Determining Financial Position
Bookkeeping does not show the financial position of a business	Accounting helps in showing a clear picture of the financial position of a business
Level of Learning
No high-level learning required	High-level learning required for understanding and analysing accounting concepts

This article will help the students of Commerce in developing an understanding of the differences between bookkeeping and accounting. Stay tuned to BYJU’S for more such interesting concepts.

The main difference between bookkeeping and accounting is that accounting involves the interpretation and analysis of financial data, which bookkeeping does not.

Bookkeeping and accounting both form part of the accounting cycle: bookkeeping primarily covers the financial recordkeeping aspects, which form the first stage of the accounting cycle, while accounting involves the use of financial records to prepare reports, conduct financial analysis, and produce financial information.

Have A Look At The Table Below To See The Differences Between Bookkeepers And Accountants:

Bookkeepers:	Accountants:
Responsible for the first step in the accounting process, i.e. recording financial transactions.	Responsible for the entire accounting process, including recording, interpreting, classifying, analysing, summarising and reporting on financial data.
Usually perform a fixed set of general tasks related to financial recordkeeping. These tasks are often mechanical and repetitive in nature.	Usually perform a variety of challenging tasks, and may choose to specialise in fields such as tax accounting, internal auditing, or management accounting.
Do not usually require any formal qualifications. (However, many organisations prefer to employ bookkeepers with some form of relevant training and/or certification.)	Require formal qualifications in accounting. Examples of relevant formal qualifications include: BAcc BCom (Accounting) Postgraduate Diploma in Accounting ACCA CIMA
Provide assistance to accountants.	Supervise bookkeepers and develop bookkeeping systems.

The distinction between bookkeeping and accounting, or between bookkeepers and accountants, is not always so clear. In smaller firms, for example, bookkeepers may be required to perform certain accounting duties, or accountants may be required to perform the full bookkeeping function in addition to their usual accounting duties.