Bookkeeping and Accounting are Interconnected Terms

Before we look at the differences between these two financial terms, let’s first understand the terms nicely. While both bookkeeping and accounting are relevant tools communicating the financial activity of a firm, the former is the subset of the latter. Bookkeeping – It refers to the process of recording the financial activities of a business including preparing financial reports, tax returns and internal reports. It records all financial transactions and thus facilitates the day-to-day operations of the firm.

Accounting – It refers to the process of designing the book keeping system, devising controls that analyses, verifies the recorded information and ensures the system is working properly. Accountants in hove also encompasses the role of measuring the effects of a financial activity on a firm.

Difference between Book keeping and Accounting

• Bookkeeping is a key component of accounting while accounting is a much broader term.
• Accountants design the record keeping system while bookkeepers follow them.
• Accountants analyse and verify the recorded information while bookkeepers accumulate, organise and store information.
• Accountants provide financial reports to investors and business managers about the performance of the company while bookkeepers provide reports that are for internal use.
• Accountants build internal controls for proper functioning of the system while bookkeepers adhere to these controls while performing their jobs.
• Accountants prepare financial reports based on the information accumulated by the bookkeepers.

The role of accountants and bookkeepers may differ from one another but, one cannot function without the support of the other.

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