"You may say Im a dreamer, but Im not the only one, I hope someday you will join us, and the world will live as one. "
- John Lennon
I have seen people referring to bookkeeping and accounting as the same thing. They fail to understand the basic difference between the two terms. So, here is this blog explaining the main differences between bookkeeping and accounting and how each one plays an important role for your business to function smoothly.
Bookkeeping, in simple words, means to keep a record of financial transactions made for your business whereas accounting is a deeper term.
Bookkeepers are the ones who do the very first and important work of managing financial transactions and then accountants carry forward their tasks from this stage. In short, they make the accountant’s work easier.
Accounting means to gather, analyze and report financial transactions. This process is much more technical and analytical than bookkeeping. It helps businesses to decide on investments and also act as a credibility factor for the businesses in the market.
Accountants are more skilful than bookkeepers and use their knowledge to give detailed insights. They are experts who study financial transactions and generate results that are very helpful for business.
Some of the major differences between bookkeeping and accounting are –
Bookkeeping Is The First Step Of Accounting
As mentioned above, accounting deals with detailed analysis and reporting of financial transactions, unlike bookkeeping. Accounting is called the language of the business.
Accounting Is Generally A Monthly Process
Accountants are supposed to present business reports every month. But bookkeepers have to ensure that the business records are maintained daily without fail.
Accounting Reports Help In Decision Making
The purpose of monthly reporting of financial transactions is to keep an eye on incoming and outgoing money and to view the degree of improvement that our business has made. These reports allow you to take actions on what has to be done to upgrade your game.
Tools Used For Bookkeeping And Accounting Are Different
The tools used for bookkeeping are journals, calculators and ledgers whereas an accountant has to deal with accounting software like Tally ERP 9, QuickBooks, Zoho books etc.
Accounting Is A More Skilful Job And Requires Technical Knowledge
To use accounting software, a little bit of technical knowledge is required. An accountant should possess good technical and analytical skills.