What is Bookkeeping and Accounting

A company normally makes a lot of financial transactions and business activities in a given period, say, a day or even a year. Because of the large number of transactions and activities a company makes, it needs to keep track its flow of money. Once the flow is tracked and recorded, the company then analyzes the results. These results will be the basis of making the company’s financial statements.

To handle this responsibility, a company needs a department or a division that specializes in bookkeeping and accounting. These people are privy to the company’s financial secrets. Without them, companies would probably be crippled.

Most people think that bookkeeping and accounting is the same thing. Well, they are not but both are related, just like sales and marketing.

What's The Difference Between Bookkeeping and Accounting?

What makes bookkeeping and accounting different is that bookkeeping is the process of recording, classifying, tracking and monitoring financial transactions. Quite simply, bookkeeping is all about maintaining a company’s financial transactions. These financial transactions include purchasing, loans, mortgages, and any other activity that involves money. In bookkeeping, the goal is to record and summarize these financial transactions and arranges them into a usable form.

Bookkeeping just a component of accounting. In an analogy, accounting is a tree while bookkeeping is one of its branches.

Accounting, on the other hand, involves analyzing, recording, summarizing, reporting, reviewing, and interpreting financial information. The information used by the accounting staff comes from the data provided to them from the bookkeepers.

In a typical setting, accountants plan and set up the company’s accounting and bookkeeping system. It plans a schedule for a day-to-day record keeping and record turn over. 

Computerization has helped accounting and bookkeeping a lot. Although many companies still opt for the manual method, the benefits of using computers for accounting and bookkeeping far outweigh the cost of acquiring the computers and the software. Through computerization, accountants and bookkeepers can track, record, maintain, and analyze financial records and summaries in a faster, more accurate, and more efficient way.

Many modern companies also opt for automated accounting and bookkeeping systems. As its name implies, the computer program allows the finance department to automatically update their records. Templates and pre-computations are inputted into the computer. When an account is updated, the program automatically makes hundreds of computations to reflect that change on the ledgers. This saves accountants and bookkeepers precious time and effort and reduces the chances of inaccuracy.