Bookkeeping and Accounting are often considered as same. But it should be noted that there is a difference between them.
Bookkeeping is mainly concerned with identifying the transactions of financial nature, recording them, and maintaining their systematic record in the books.
Accounting in a very simple sense is maintaining a record of varied activities. Thus, Accounting is some things that are used almost by everyone in their daily lives. In our lifestyle, we maintain a record of varied transactions or activities.
Thus, bookkeeping helps in keeping the entire and comprehensive record of all the business transactions in an organized manner. It is a small part of accounting but it is very important as it forms the basis for accounting.
Accounting is that the secondary stage, whereas, bookkeeping is that the primary stage. To perform the function of bookkeeping, one need not have specialized and expert knowledge of accounts. This function is often performed by the clerical or junior staff of the business.
Difference between Bookkeeping and Accounting
| Point of Distinction | BookKeeping | Accounting |
|---|---|---|
| Key Area | It is a function of identifying the events of financial character, measuring them in terms of money, recording them in the books, and lastly classifying them. | Apart from functions of bookkeeping it is concerned with summarizing, interpreting, and communicating the financial information to the various parties interested in business. |
| Purpose | The main purpose is to record the financial transactions and events in the books of accounts. | The main purpose is to find out the net results and financial status of the business and communicating the results to its various users. |
| Stage | It is the first stage that forms the basis for accounting. | It is the second stage and it begins where book-keeping ends. |
| Nature of Job | It is a routine job. | It is analytical and dynamic in nature. |
| Performed by | It is performed by lower-level staff. | It is performed by the higher-level staff. |
| Knowledge | It does not demand any specialized knowledge of accounts. | It demands specialized knowledge of accounting rules and principles. |
| Connection | It provides a basis for starting the process of accounting. | It starts where book-keeping ends. |
Also, Read 6 Limitations of Accounting