Accounting and bookkeeping are both financial tools used for the recording of business transactions. There are slight differences between accounting and bookkeeping and they are mainly some technical differences. To understand what separates accounting from bookkeeping we must completely understand both categories and we must learn how they function in the everyday use.
Bookkeeping is the process of recording the business transactions and the relations between the transactions. The process of bookkeeping is mainly mechanical and does not require any analysis. Instead of the analyzing the bookkeeping relies only on the recording of the information. In the past times the records were kept in a book and this is why this financial tool is called bookkeeping. In the modern days the books got substituted with modern bookkeeping software which run on personal computers. These kind of software is very sophisticated and it can tremendously help the job of the bookkeeper.
Basically the process of bookkeeping consists the recording of the incoming transactions ( received payments in form of money or cheques from customers, etc. ) and the recording of the outgoing transactions ( paying for specific bills in the correct time, etc. ).
There are two basic kinds of bookkeeping : single entry bookkeeping and double entry bookkeeping. In the case of the single entry bookkeeping we can find each transaction carried to the debit column or the credit column. On the contrary, in the case of double entry bookkeeping we can find two entries for each transactions carried to the ledger. One entry is carried to the credit side and the other to the debit side. This is done in the way that the two entries can be checked.
Accounting is also the systematic recording of business transactions but it includes additional reports and further financial analysis of the transactions. This basically means that bookkeeping is the part of the accounting process. Accounting beside the recording of the financial transactions also does the preparation of statements, liabilities of the assets and the various results of the whole business. Basically, accounting is using the bookkeeping information, interprets the data and compiles it into reports and presents it in a form of reports to the management.
Accounting is used in every business from small companies to large corporations. In the smaller companies, one person can perform both the accounting and bookkeeping. But in large companies and corporations a whole department of people is needed to successfully perform the accounting and bookkeeping tasks. Smaller businesses with a small number of transaction do not provide too much work for the bookkeeper, so he can perform the tasks of the accountant too.
The important part of accounting is the analysis of the business transactions and the delivering of the business results to the management of the company. The business results are usually delivered in forms of reports. The management from these reports can see whether the company is successful or not and with the help of the analysis they can see where do the problems come from in case of negative results.