Differences between Accounting and Bookkeeping

Differences between Accounting and Bookkeeping

Accounting and bookkeeping are crucial aspects when it comes to the management of business finances. The two are often confused to be one. However, this is not the case; hence, this discussion will elucidate the differences between the two. By definition, accounting refers to the presentation and interpretation of financial data to various stakeholders to inform their decision-making. On the other hand, bookkeeping is the art of recording and organizing an organization’s financial data. Thus, even by definition, there is a difference between the two disciplines (Yap, 2019). Another difference can be associated with the objective of the two. It is worth noting that bookkeeping has an integral objective of systematically keeping and recording financial transactions for reference purposes. On the other hand, the primary objective of accounting is to weigh the financial scenario facing an organization and offer communication that is necessary to relevant institutions.

There is a difference between accounting and bookkeeping regarding the preparation of financial statements. Essentially, accounting results in the preparation of financial statements such as the statement of financial position and the statement of financial performance. On the other hand, there is no such thing as preparing financial statements in bookkeeping. Only transactions are recorded in their respective journal entries in bookkeeping. Further, there is a difference in the skills that are required for accounting bookkeeping. According to Gröblacher & Mizdraković (2019), accounting is more complex than bookkeeping in nature. Thus, an accountant will require more skills than a bookkeeper. Particularly, an accountant will require analytical skills to perform the duties of analyzing financial statements, while a bookkeeper will only need simple skills to record transactions correctly in the books of account. In light of the skills required for each of the two functions, it is evident that an accountant will require more learning than a bookkeeper. An accountant must understand the bookkeeper’s part before covering the dimension of reporting and analysis. However, a bookkeeper will not need to understand the work of an accountant to perform bookkeeping duties.

Further, when it comes to decision-making, accounting supports significant decisions as compared to bookkeeping. Notably, this is so because data provided through the process of bookkeeping is not sufficient for various decisions required in an organization. However, with accounting, the management of an organization can entirely rely on data from an accountant to make important decisions (Rezaee & Wang, 2019). For example, data from a journal cannot sufficiently support an investment decision, while data from an income statement can support an investment decision.

The role of an accountant will include aspects like analyzing the operational costs of a company, reviewing the correctness and truthfulness of financial statements, undertaking adjustment of recorded entries, which entails recording yet-to-be-recorded but already occurred financial expenses, computing and filing of tax returns and aiding in evaluating and comprehending the impact of various financial decisions (Suharyono, 2022). On the other hand, bookkeeping will generally entail roles like completing payroll, maintaining and balancing historical accounts, general ledgers and sub-ledgers, producing invoices, posting credits and debits, and recording financial transactions. Overall, there is clear evidence that accounting and bookkeeping have distinct differences that make the two often assumed to be one discipline to be different. The difference should only exist to the extent of differentiating the work for each function but not extend to separating the interdependency between the two, as it is crucial for the general success of a business.

References

Gröblacher, M., & Mizdraković, V. (2019). Triple-entry bookkeeping: History and benefits of the concept. Digitization and Smart Financial Reporting, 58-61.

Rezaee, Z., & Wang, J. (2019). Relevance of big data to forensic accounting practice and education. Managerial Auditing Journal, 34(3), 268-288.

Suharyono, S. (2022). Implementation The Law Of Repetition In Accounting. International Journal of Economics, Business and Accounting Research (IJEBAR), 6(2), 1339-1345.

Yap, F. D. (2019). Implementation of bookkeeping practices in micro-enterprises. Asia Pacific Higher Education Research Journal (APHERJ), 6(1).

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Write a 2-page paper that discusses the differences between accounting and bookkeeping (using APA formatting) and include a cover page and a reference page. You should have a minimum of three references (and remember to use citations in the text to match the references).
Writing Requirements:
2 pages total (not including cover page or reference page)
Proper APA format on citations and sources
Minimum of 3 scholarly sources (the annual reports you reviewed can be used as scholarly sources for this paper)