BOOK KEEPING & ACCOUNTING
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What is the Difference Between Bookkeeping and Accounting?
In financial parlance, the terms bookkeeping and accounting are almost used interchangeably. However, these concepts are different. While bookkeeping is all about recording of financial transactions, accounting deals with the interpretation, analysis, classification, reporting and summarization of the financial data of a business.
What is Bookkeeping?
Bookkeeping is the process of systematic recording and classification of financial transactions of an organisation.
Bookkeeping is said to be the basis of accounting, whereas accounting forms a part of the broader scope in finance.
The most important focus of bookkeeping is to maintain an accurate record of all the monetary transactions of a business. Companies use this information to take major investment decisions.
The bookkeeper maintains bookkeeping records. Accurate bookkeeping is critical for business as it gives a piece of reliable information on the performance of a company.
Bookkeeping process consists of the following steps:
- Identifying a financial transaction
- Recording a financial transaction
- Preparing a ledger account
- Preparing trial balance
What is Accounting?
Accounting is the systematic process of recording, measuring and communicating information about the financial transaction taking place in a business. Accounting helps in determining the financial position of a firm and present the same to stakeholders.
It helps a business in the short and long term decision making and also conveys the credibility of a company to the market.
It is also known as the language of business.
The purpose of accounting is to provide a clear view of financial statements to its users, which includes investors, creditors, employees, and government.