Do You Know the Difference between Bookkeeping and Accounting?

Do You Know the Difference between Bookkeeping and Accounting?

Small business owners often think of accounting and bookkeeping as one and use them interchangeably. Although it is true that bookkeeping and accounting both are related to the numbers and figures and both deal with the company’s finance; however, there are a few differences that keep them apart.

The Function of Bookkeeping

Bookkeeping could be stated as one part of the accounting process. It is about recording the financial transactions of a business that has happened over a period of time. Bookkeepers are usually responsible for.

  • Recording suppliers’ invoices.
  • They pay the suppliers.
  • They keep log cash receipts from customers.
  • They preserve all supporting documents for all business transactions.
  • They document the inventory changes.
  • They create and issue customer invoices.
  • They process employee payroll.
  • They manage petty cash transactions.

A specific set of rules is followed by the bookkeepers to make procedures to be performed. The complexity of the bookkeeping is subjective to the size of business and transactions that are happening on a regular basis.

The Function of Accounting

Accounting is the entire process of managing the financial information of the company. It is about analyzing, interpreting, reporting, and summarizing the financial data of a company to be used for further proceedings. Some of an accountant’s responsibilities include:

  • Preparing financial statements on the condition and performance of the company.
  • It is creating management reports to address specific issues.
  • Analyzing operations costs.­
  • Preparing adjustment entries (i.e., earned revenue or incurred expenses that haven’t yet been recorded during the bookkeeping process).
  • They compile tax returns from the financial data.
  • They create a company budget.
  • They help the business owner understand the company’s financial data and the impact of his/her financial decisions.

The accounting process is a business function to state your current financial standings and recording of the financial considerations of a company.