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Similarities and Differences between Accounting and Bookkeeping Many times, accounting is confused for accounting. Accounting is the systematic way of identifying, maintaining records, classification, analyzing and communicating financial information over a specified amount of time in order to understand the losses and profits of a company whereas publication keeping is a portion of the process in accounting through record of financial transactions. Book keeping provides information essential for preparation of accounts. Both processes have their similarities and differences as outlined below. Similarities Records
Learning The Secrets About Accounting
In both accounting and book keeping, records are extremely important. Book keeping demands daily noting down for simple accessibility when it comes to preparing reports and bookkeeping demands the documents for preparation and analyzing financial statements.
Learning The Secrets About Accounting
Classification From the daily transaction records, they are classified into various books i.e. bank publication that’s used to document the deposits and withdrawals made, buy book for those records of all purchases made on credit, money book used for the purpose of documenting all cash payments such as trade payables like trade payables and petty cash purchases and money receipts like trade receivables and cash sales and finally the sales book by which non-cash sales are listed together with client’s key specifics and later transferred into the customer’s account. Differences Tools used Accounting uses this income statement, balance sheets and even cash flow statements because its main tools while in publication keeping journals and ledgers are used. Financial statement preparation While book keeping does not require any preparation of Financial statements, accounting is largely the preparation of these financial statements such as balance sheets, profit and loss statement and cash flow statements. Management role The management is not involved in book keeping but they have a special interest in accounting records because it is useful in checking on the performance of an organization and making of future decisions based on that information. Decision making Whereas information provided by book keepers cannot be solely used to make decisions, accounting information plays a major role in making decision making in a firm. Job role Book keeper’s roles are mainly to collect, record and Classify information relating to monetary transactions while accounting requires more skilled personnel to interpret and convey the consequences for decision making. Skills needed Accounting is a bit complicated hence it requires special skills while on the other hand bookkeeping does not demand any specific skills because of its simple nature. Categories Accounting is classified to cost, management and financial accounting among other categories while reserve keeping is categorized into single entry and double entry. A lot of people tend to confuse book keeping and accounting to be the same thing. However, as we have seen in this paper the two processes share some common characteristics and as well have their differences that distinguish one from another.