Bookkeeping and Accounting

Tally Solutions |Updated on: January 6, 2022

• Difference between bookkeeping and accounting
• Importance of bookkeeping
• Bookkeeping process
• Examples of bookkeeping tasks

Bookkeeping or books of original entry is a science and art of recording all the business transactions that result in a transfer of money or money’s worth’ in the accounts books. Bookkeeping is a task concerned with recording and classifying financial data related to business operation in order of its occurrence. Bookkeeping and accounting are inseparable and there is a thin line to differentiate bookkeeping and accounting.

Difference between Bookkeeping and Accounting

Accounting is a broad subject. It calls for a greater understanding of records obtained from bookkeeping and an ability to analyse and interpret the information provided by bookkeeping records.

Bookkeeping is the recording phase while accounting is concerned with the summarizing phase of an accounting system. Bookkeeping provides necessary data for accounting and accounting starts where bookkeeping ends.

The distinction between Bookkeeping and accounting can be tabulated as under:

Importance of bookkeeping

• Bookkeeping helps to keep track of receipts, payments and record of every expenditure made from the business.
• It helps to summarize the income and expenditure records on a periodic basis.
• This records are used to create financial reports which tells us specific information about the business as how much profits the business has made or how much the business is worth at a specific point of time.

Bookkeeping process

Bookkeeping is a mechanical task which involves the following steps:

• Collection of basic financial information.
• Identification of events and transactions with financial character i.e., economic transactions.
• Measurement of economic transactions in terms of money.
• Recording financial effects of economic transactions in order of its occurrence.
• Classifying effects of economic transactions.
• Preparing an organized statement known as trial balance.

Examples of bookkeeping tasks

• Billing for goods sold or services provided to clients.
• Recording receipts from customers.
• Verifying and recording invoices from suppliers.
• Recording payment made to suppliers.
• Processing employees pay, ESI, PF, etc.,
• Monitoring individual accounts receivable.
• Recording depreciation and other adjusting entries.
• Providing financial reports.

Read More on Bookkeeping

What is Bookkeeping, Bookkeeping Principles, Types of Bookkeeping System, Elements of Bookkeeping, Difference between Accountant & Bookkeeper, Basic Accounting Assumptions Basis Bookkeeping