DIFFERENCE BETWEEN BOOK KEEPING AND ACCOUNTING
To understand the Difference between Book keeping and Accounting, firstly we understand the both terms:
Book-Keeping is an art and science of recording business transactions in a systematic and chronological order. It is a combination of two words: Book + Keeping. It means to keep the books of accounts to record all the financial transactions. It is concerned with identification of transactions and events, expressing them in the monetary form and then recording the transactions in the books of accounts to make it available for future reference also.
Accounting refers to the mechanism of maintaining and keeping the records of the transactions and events and also its analysis and interpretation. It also includes the preparation of final accounts i.e. Trading and Profit and Loss Account and Balance Sheet at the end of the financial year. It is associated with communicating the interpreted results of the financial information to its users.
The Difference between Book keeping and Accounting is as follows:
|BASIS OF DIFFERENCE||BOOK-KEEPING||ACCOUNTING|
|STAGE||It is the basis of accounting. It is primary stage.||It starts where book-keeping ends. It is secondary stage.|
|SCOPE||It is narrower in scope.||It is wider in scope.|
|OBJECTIVE||The main objective of book-keeping is to maintain the records of financial transactions.||The main objective of accounting is to ascertain the net results and financial position of the business and to communicate them to interested parties.|
|NATURE OF JOB||The book-keeping function is routine and clerical in nature.||Accounting function is analytical in nature.|
|WHO PERFORMS||Book-keeping function is performed by junior staff.||Accounting function is performed by senior staff.|
|KNOWLEDGE LEVEL||It can be performed by the persons having limited level of knowledge.||It is performed by the persons having higher level of knowledge as compared to book-keeper|
|ANALYTICAL SKILL||The book-keeper is not required to possess analytical skills.||The accountant is required to possess analytical skills.|
|PROCESS||The process involves: Identification of transactions, Measurement in terms of money, Recording in Journal, Classifying in ledger, Balancing of ledger accounts, Preparation of Trial Balance.||The process involves: Identification of transactions, Measurement in terms of money, Recording in Journal, Classifying in ledger, Summarising, Analysing, Interpreting, Communicating|
|ADJUSTMENTS AND RECTIFICATIONS||No adjustments are required.||Adjustments, transfers and allocations are done as per the policy framework in final accounts.|