Most of the people use the two terms interchangeably, but according to the definitions and scope, there are many differences between the two. Before going deep into the topic, let’s have a look at the basic definitions of the two terms.
Definition of Bookkeeping:
The process of recording monetary business transactions properly by a clerk or bookkeeper is called bookkeeping. The main purpose of bookkeeping is to record the day to day transactions and prepare a profit and expenditure statement at the end of a specified period.
The person responsible for bookkeeping is known as a bookkeeper. The common type of books maintain by bookkeeper are
- Sales daybook
- Sales return book
- Purchase daybook
- Purchase return book
- Cash Book
- Journal General
Definition of Accounting Services:
Accounting is the process of recording, summarizing, analyzing and reporting of monetary transactions of an organization. Accounting services are a complete set of activities that start from recording and ends with financial reporting. The person responsible to carry all this process is known as an accountant. Accounting services are mainly comprised of:
- Preparing and posting of all adjusting entries
- Preparation of an organization’s financial statements
- Interpretation of financial statements
- Compiling financial data for tax returns
It means that bookkeeping is the first step of accounting while accounting services have a much bigger scope and requires a lot of expertise.
7 Basic Differences between the Bookkeeping and Accounting Services according to https://bookkeepingad.com/:
|Definition||Bookkeeping is the process of identifying and recording of a business transaction||Accounting is the process of recording, summarizing, analyzing, reporting and interpreting of financial record of an organization.|
|Purpose||The main purpose of bookkeeping is to record all the monetary transactions of a business in a proper way.||The purpose of accounting is to record every business transaction and extract information from financial record for decision making.|
|Making of Financial Statements||Bookkeeping does not include preparation of financial statements.||Accounting services includes preparation of all financial statements and reports.|
|Skills||Bookkeeping does not require any special skill or much knowledge of accounting,||Requires a lot of skills and expertise to analyze and interpret information.|
|Information for Decision Making||Bookkeeping does not provide sufficient information||Accounting provides sufficient information for necessary for taking decision and future estimates|
|Reports||Bookkeeping mainly concern with the preparation of general Journal and Ledger Reports||Accounting process includes preparation of profit and loss, balance sheet, cash flow, statement of changes in equity|
|Types||Single Entry Bookkeeping, Double Entry Bookkeeping||Financial Accounting, Cost Accounting, Financial Management, Management Accounting|
If you are running a small to medium size organization, you can easily avail the following benefits by hiring a bookkeeper instead of an accountant:
There is always a big difference between the salary of a bookkeeper and a proper accountant. If you are running a small to medium-size business, you can minimize your cost by hiring a bookkeeper instead of an accountant
Less Possibility of Error:
Bookkeepers are more specialized in data entry, compared to accountants, as they focus more on summarizing and reporting of data. Hiring bookkeepers always give you confidence that your business transactions are correctly recorded in your books of accounts.