Welcome to my regular accounting and finance blog. Today is September 28, 2018.
My blogs are designed to teach basic accounting and financial concepts that everyday people can apply to their financial and business lives. Each day I will explain an accounting or financial concept in general terms. I will start with easy topics, and move on to more complex topics over time.
Today’s topic is “Accounting vs Bookkeeping .”
Although the terms bookkeeping and accounting are often used interchangeably, bookkeeping is generally referred to as the basic recording, often routinely, of initial daily transactions into some form of ledger. Transactions are entered into ledgers such as a general ledger, cash ledger, sales ledger, purchase ledger, or payroll ledger. True bookkeepers will not take this process any further. Traditionally, records were kept in books, hence the term bookkeeper. Today however, ledgers are often kept in digital format, or with accounting software packages. Bookkeeping is still an important function, as it provides the foundation for all financial reporting. Bookkeepers must record transactions in an accurate and precise manner. Bookkeeping is essentially the foundation of accounting.
Accounting is a much broader term which encompasses bookkeeping plus the processes of organizing, analyzing, and communicating bookkeeping ledgers into financial statements and other reports that are useful to readers. Accounting also refers to other functions such as budgeting and cost accounting.
Both Bookkeeping and Accounting are essential to most businesses. Proper accounting, financial statements and reports can not be accurate without good bookkeeping.
I hope you will enjoy my blogs and find them useful. My next topic will be “Balance Sheet vs Income Statement.” Please drop by.
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