Bookkeeping And Accounting

Bookkeeping and accounting

Bookkeeping and accounting are both relevant tool in communicating the financial activity, performance and condition of a business entity.

The important role of bookkeeping and accounting in every business has increased the demand for bookkeeping and accounting job or services worldwide. Because of the high demand, it made bookkeeping and accounting as two of the most profitable and rewarding profession in the world.

If you want to enter this lucrative profession and opportunity, it is a good choice to learn and understand the concept, principles and procedures of both bookkeeping and accounting.

The Difference between Bookkeeping and Accounting

Every business and not-for-profit entity needs a reliable bookkeeping system based on established accounting principles. Keep in mind that accounting is a much broader term than bookkeeping. Bookkeeping refers mainly to the record-keeping aspects of accounting; it's essentially the process of recording all the information regarding the transactions and financial activities of a business.

Defining bookkeeping

Bookkeeping is an indispensable subset of accounting. Bookkeeping refers to the process of accumulating, organizing, storing, and accessing the financial information base of an entity, which is needed for two basic purposes:

• Facilitating the day-to-day operations of the entity

• Preparing financial statements, tax returns, and internal reports to managers

Bookkeeping (also called recordkeeping) can be thought of as the financial information infrastructure of an entity. The financial information base should be complete, accurate, and timely. Every recordkeeping system needs quality controls built into it, which are called internal controls.

Defining accounting

The term accounting is much broader, going into the realm of designing the bookkeeping system, establishing controls to make sure the system is working well, and analyzing and verifying the recorded information. Accountants give orders; bookkeepers follow them.

Accounting encompasses the problems in measuring the financial effects of economic activity. Furthermore, accounting includes the function of financial reporting of values and performance measures to those that need the information. Business managers, investors, and many others depend on financial reports for information about the performance and condition of the entity.

Accountants design the internal controls for the bookkeeping system, which serve to minimize errors in recording the large number of activities that an entity engages in over the period. The internal controls that accountants design are also relied on to detect and deter theft, embezzlement, fraud, and dishonest behavior of all kinds.

Accountants prepare reports based on the information accumulated by the bookkeeping process:

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