There is a giant misleading myth among people that bookkeeping and accounting are the same things. On the other side, others understand that they are completely different terms and processes, but cannot find that link that distinguishes them. It is not a mystery to anyone, though, that bookkeeping and accounting are relevant. Both depend on each other and both are connected with balances in a company and finances in a business. However, understanding the real connection between bookkeeping and accounting, as well as getting aware of what the difference between them is, seems to be essential regardless why exactly you are looking for the big answer what bookkeeping vs accounting is. Well, let`s make it clear right away!
Simple Thoughts To Distinguish Bookkeeping from Accounting
Here are some quick guides and explanations that will soon make it clear for you – bookkeeping and accounting are not the same things, but they have much in common.
Bookkeeping is not accounting
This is the first thing you need to understand and remember forever. Bookkeeping is not accounting, but only a part of accounting. Bookkeeping aims to follow and record the financial transactions in a company. This includes sales and purchase, receipts and payments, important note for AUS people is to check for Xero bookkeeper in Sydney, in our personal opinion it is the top service. However, accounting has many other functions and purposes like preparation of a balance, which is a matter of fact, depends on the proper bookkeeping performance.
Not every bookkeeper is an accountant
Usually, the accountant is the senior economy specialist in a company. He does check each of the processes and he performs the most difficult among them. Though, bookkeeper is only in charge to see if all the transactions are filled in the daybooks, which will be additionally revises and used for other purposes by the accountant.
Bookkeeping is not the e-accounting process
Also, some people live in a lie that bookkeeping is the electronic version of accounting. They also think that accounting is the old-school term and way of calculating finances in a company, while the bookkeeping software work takes its turn nowadays. There is nothing like that, because you can buy software for both – bookkeeping or for accounting and they will be yet different.
Bookkeeping is not accounting in commerce businesses only
Another wrong way to distinguish bookkeeping and accounting is to think that bookkeeping is the accounting process in a firm that specializes in sales. Well, just because bookkeeping has a main function to follow purchases and sales, it does not mean that an IT company that develops and produces new software products do not have bookkeeping department or at least a person, who manages the bookkeeping process.
Bookkeeping Has Different Functions Than Accounting
Finally, see the differences between the functions that both are driven to and you will finally realize that indeed, even though similar and connected, bookkeeping and accounting are not the same things.
The main aim in bookkeeping is to record financial transactions. On the other side, bookkeeping pays attention at debits and credits. Bookkeepers produce invoices and complete payrolls. Last, but not least, they balance things like subsidiaries, general ledgers, and historical accounts. But these are all of the bookkeeping functions.
On the contrary – accounting has a main purpose to prepare the company final financial statements, the following of whether the business wins or loses funds and finally – make analyzes how to improve the financial situation in a business.
Now you know the difference between bookkeeping and accounting!