Difference between Bookkeeping and Accounting

Bookkeeping and Accounting are two different processes in Accountancy. The former is the process of systematically maintaining records or books of accounts of an organisation. However, the latter is the process of measuring and recording all financial transactions of a financial year.

 What is Bookkeeping?

Bookkeeping can be defined as the proper and systematic maintenance of the books of accounts. It is the science and art of identifying and recording accounting transactions in a systematic way in the proper books of accounts. It is concerned with the proper maintenance of the books, i.e., Journal, Ledger, Cash Book, and other subsidiary books. 

It must be noted that bookkeeping is not concerned with disclosing or interpreting the results of the business, unlike accounting.

Bookkeeping consists of the following steps:

• Identifying a  financial transaction
• Recording or posting debit or credit 
• Producing invoices
• Preparing financial statement
• Maintaining and balancing subsidiaries and other accounts 

What is Accounting?

Accounting is the process of measuring and recording all the financial transactions that happened in a financial year. It includes summarizing, analyzing and recording the data. It helps in getting a clear picture of the financial position of the business by seeing the value of a company’s assets and liabilities. 

Accounting is considered to be a discipline that is based on many different terms, rules, principles and standards, which are needed to be followed to obtain the required information for the decision-making process.

Accounting consists of some basic terms:

• Summarizing the data:  In this step, all the financial transactions are recorded and summarized at one place.
• Analyzing the data: After summarizing the data, different specialists analyze the data. 
• Interpreting the data: After the analysis of the data has been completed, the interpretation of the data is done. In this step, all the information collected from the previous steps is forwarded.
• Communicating the information: After the successful completion of the above steps, the information which is required by the different investors and other business entities is communicated to them.

Difference between Bookkeeping and Accounting:

Basis	Bookkeeping	Accounting
Definition	Bookkeeping includes identifying and recording all financial transactions.	Accounting is the process of measuring and recording all financial transactions that happened in a financial year.
Objective	The objective of Bookkeeping is to prepare original books of accounts.	The objective of Accounting is to record, analyze, and interpret all the transactions.
Scope	It has a limited scope.	Accounting has a wider scope as compared to Bookkeeping.
Decision Making	Management cannot take decisions on the basis of bookkeeping because it is only concerned with the management of books.	With the help of accounting, management can take decisions as it is responsible for communicating the information.
Analysis	The information is only recorded in the bookkeeping and not analyzed.	In Accounting, analysis is done to obtain important insights into the business.
Skill Required	There is no need of having any special skills to record the transactions in Bookkeeping.	Accounting requires special skills because it is analytical in nature.
Reflecting Position of Business	Bookkeeping does not show the financial position of the business as it is only concerned with recording.	Accounting shows the net results of the business, including profit earned and the assets and liabilities of the business.
Principles of Accountancy	Accounting concepts and conventions are followed in Bookkeeping.	The methods of interpretation and reporting of transactions in accounting differ from firm to firm.
Level of Work	Bookkeeping is restricted to a low level of work, which is clerical in nature.	Accounting is concerned with low, medium, and even top-level management.
Supervision	The Book-keeper does not supervise the work of an Accountant.	An Accountant is responsible for supervising and checking all the work done by Book-keeper.