Difference between accounting and bookkeeping

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July 23, 2020

Accounting begins where book-keeping ends, bookkeeping, and accounting are complementary to each other difference between accounting and bookkeeping. Such difference between Accounting and Bookkeeping, i. scope, ii. objective, etc.

Learning Objectives : i. Difference between Accounting and Bookkeeping. ii. Relationship Accounting with bookkeeping and Accountancy.

After studying this unit,you will be able to:

Difference between Accounting and Bookkeeping on the following grounds : i. Meaning. ii. Scope. iii. Stage. iv. Objective. v. Nature of job. vi. Performs. vii. Analytical Skill. viii. Posting. ix. Totaling and Balancing.

Difference between Accounting and bookkeeping can be depicted in the following chart as :

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Difference Between Accounting and Bookkeeping

Difference between Accounting and Bookkeeping : S. No 1.

Basis of difference

Meaning

Bookkeeping

Bookkeeping is concerned with the identification of business transactions, measuring them in terms of money, recording in the books of original entry, and classifying them in different accounting.

Accounting

Accounting is concerned with the summarization of the classified transactions in the form of final accounts, analyzing and interpreting them, and lastly, communicate the results to the concerned persons.

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2.

Scope

Bookkeeping is concerned with, a. Identifying the transactions of financial nature, b. Measuring the identified transactions in terms of money,

Accounting is concerned with, a. Summarising the classified transactions, b. Analysing and interpreting the summarised results, and c. Communicating the results to parties interested in them.

c. Recording the measured transactions, and d. Classifying them into ledger.

3.

Stage

Book-keeping is the primary stage.

It is the second stage.

Accounting begins where bookkeeping ends.

4.

Objective

The main objective of Bookkeeping is to maintain systematic records of transactions of financial nature.

Its main objective is to ascertain the net results and financial position of the business and to communicate them to interested parties.

5.

Nature of Job

The Book-Keeping function is routine and clerical in nature.

The Accounting function is analytical in nature.

6.

Performs

The Book-keeping function is performed by junior staff.

The Accounting function is perform med by senior staff.

It can be performed by persons having a Limited level of knowledge.

It is performed by persons having a higher level of knowledge than that of Bookkeeper.

7.

Knowledge Level

8.

Posting

It is concerned with posting of Journal entries in the Ledger from the books of accounts.

It is concerned with checking of accuracy of posting.

9.

Totaling and Balancing

It is primarily concerned with the totaling and balancing of various ledger accounts.

It is concerned with the preparation of accurate Trial Balance.

10.

Inclusion of adjustments and rectification of errors

Book-keeping excludes adjustments and rectification of errors.

Accounting includes adjustments and rectification of errors.

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11.

Results of the business

It never discloses the results of the business.

It shows the net result of the business as well as the actual position of assets and liabilities.

12.

Branches

Book-keeping has no branch.

Accounting has several branches. Financial Accounting, Cost Accounting, Management Accounting, etc.

13.

Principle of Accountancy

Rules of accounting, principles, concepts, and conventions are followed.

Only the method of interpretation and reporting to interested persons varies from firm to firm.

14.

Recording time of business transactions

Transactions are immediately recorded.

Transactions are recorded after the classification of transactions at the end of the year.

15.

Art and Science Aspect

Basically it represents the art aspect.

Basically, it represents the science aspect.

Relationship Accounting with Bookkeeping and Accountancy can be depicted in the following chart as :

Relationship Accounting with Bookkeeping and Accountancy 4/6

Relationship Accounting with Bookkeeping and Accountancy : The term ‘Bookkeeping’ is used to refer to the art recording business transactions in the books of accounts in a proper way.

It is a part of Accounting and is concerned with record keeping or maintenance of books of accounts which is often routine and clerical in nature and can be accomplished through the use of mechanical and electronic devices.

Accountancy may be defined as an art as well as a science of recording the economic activities of a person or concern in the books of accounts and evaluating the results thereof at periodical intervals.

It tells us, how to compile books of accounts, how to summarize the accounting information, and finally how t communicate it to various interested parties.

Relationship: Thus, Bookkeeping is a part of accounting and accounting is a part of accountancy.

Mathematically, Bookkeeping is a subset of accounting and accounting is a subset of accountancy.

The relationship Accounting with Bookkeeping and accountancy be diagrammatically represented as follows :

i. Cause and Effect Relation: A cause and effect relationship can be built up between accounting theory and accounting practice. Accounting theory is considered to be a cause while accounting practice as an effect.

ii. Target and Path Relation: Accounting is accomplishing in a systematic manner by following the accounting theory.

As such, accounting theory may be considered as a target, while the path of accounting practice is followed to reach such an established target.

iii. Science and Art Relation: Like other branches of science, accounting theory is based on certain specific accounting concepts, principles, hypotheses, conventions, and so on. As such, accounting theory is called a science. On the other hand, accounting practice is an art, because practical accounting is done on the basis of it.

iv. Creator and Creation Relation:

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Accounting theory is the creator of different accounting practices which in turn creates necessary methodologies for the accomplishment of the different functions of accounting.

Without the existence of accounting theory, accounting practices cannot be done in a systematic manner. On the contrary, if there is no necessity for accounting practice, then the drawing of accounting theory is a useless job.

v. Changeability Relation: Sometimes accounting practices are revised on the basis of prior change of accounting theory and vice versa.

vi. Genus Specifics Relation: Accounting theory is the Genus by following which different Species i.e. Accounting practices are generated according to the convenience of different concerns.

Therefore, Accounting theory is almost generally accepted, while accounting practices differ according to the inter-personal anomaly of the accounting or the difference in the practical application.

Quick Revision Difference Between Accounting and Bookkeeping i. Relation : a.Bookkeeping basis of accounting. b. Accounting basis of Entire process. ii. a.Bookkeeping = book keeper/ machine. b. Accounting = machine + accountant. iii. a.On the basis of book keeping decision making can’t be possible. while b.On the basis of accounting decision making can be possible. iv. a.Bookkeeping maintain only two types of books : 1. journal 2. ledger. b. Accounting maintains a total of 5 types of books: 1. journal, 2. ledger, 3. trial balance, 4. profit and loss account, 5. balance sheet.

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