What is the Difference Between Bookkeeping and Accounting?

• Reading Time: 3 Minutes
• Published: August 26, 2020
• Last Updated: January 23, 2025

Accounting is a comprehensive subject, which is full of many new concepts and topics. Many terms are confused with each other. It’s very important to understand the difference between them to use them properly in the future. Bookkeeping and accounting are one of them.

Bookkeeping is that part of accounting which is concerned with the recording of day to day transactions. It focuses on recording the transactions properly and effectively according to the rules of accounting. It includes-

• Maintenance of payroll transactions.
• Record keeping of bills receivables and bills payable.
• Management of petty cash book.
• Preparing bank reconciliation statements.
• Helping in preparing cash flow statements, income statements, and balance sheets.

Bookkeeping is the basis for further accounting procedures. Thus, a high degree of accuracy is required in recording transactions under the bookkeeping system.

Accounting is a broader term. It involves bookkeeping and further processes. It involves analyzing the record transactions and making meaningful conclusions out of it. It has two parts – bookkeeping and interpretation of the recorded transactions for further decision making. It involves tasks as financial forecasting, financial audit, tax returns, strategic planning, etc. In fact, accounting is lot more than bookkeeping. There are many accounting outsourcing companies in the USA that provide expert services in this field.

Bookkeeping and Accounting are Different From Each Other in Many Ways Such as-

Frequency

Bookkeeping is to be carried out almost daily. There are so many transactions that happen daily. It is important to regularly record them to maintain a systematic record for them all. Management dates accounts as and when needed. Generally final accounts are maintained at the end of financial year to calculate the final profit and loss.

Qualifications

There is not so much of the professional qualification required in bookkeeping. Just a basic knowledge of accounting terms and concepts and how to record transactions is important. The job is clerical. But as far as accounting, decision making, and auditing is concerned, they require a higher degree and great professional knowledge and skill to perform complex tasks and decision making.

Costs

It is cheaper to hire a remote bookkeeper than an accountant. Bookkeepers do not require higher qualifications, and so they can be appointed at a much lower rate than the accountants and auditors which are expensive to hire since they have a high degree of knowledge and expertise.

Importance

These two processes complement each other. Only well-maintained bookkeeping will help in further accurate decision making and analyses of statements. Thus, these two go hand in hand. Together they help in maintaining a good financial structure of the business.

The above points make it clear how different bookkeeping is from accounting. Bookkeeping is a part of a vast accounting system. Together they help in maintaining and recording the financial aspect of a business. Since finance is the lifeblood of a business, its accuracy is of utmost importance. Earlier accounting and bookkeeping services were performed manually, but with the technology, they are carried out digitally. So, avail the benefits of these services for your smooth running of business.

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