If your knowledge of accounting is slim, you might be confused about the differences between bookkeeping and accounting.
Bookkeeping is a small part of accounting. It represents only the recording phase of an accounting system. Therefore, we can say that the process of accounting begins where the process of bookkeeping ends.
Accounting not only includes maintaining accounting records but also the preparation of the following statements:
- Trading and profit & loss account
- Balance sheet
The main differences between bookkeeping and accounting are summarized in the table below.
|Represents the summarizing phase||Represents the recording phase|
|It is the basis for business language||It is the basis of accounting|
|Individuals who practice accounting are known as accountants||Individuals who practice bookkeeping are known as bookkeepers|
|Only an expert can practice accounting as it requires subject-specific skills and knowledge||Anyone can practice bookkeeping as it does not require specific skills or knowledge|
|As an accountant, personal judgment is essential||Since the bookkeeper’s task is to collect data, personal judgment is not essential|
|Financial statements are prepared from accounting records||Financial statements are not prepared from bookkeeping records|
|Provides data for managerial decision-making||Does not provide data for managerial decision-making|