What are the differences between accounting and bookkeeping?

Accounting and bookkeeping are closely related fields that are essential for managing financial information in a business or organization. While both are important, there are some key differences between accounting and bookkeeping.

Bookkeeping is the process of recording and organizing financial transactions, such as sales, purchases, receipts, and payments, in a systematic way. This includes maintaining accurate records of all financial transactions, reconciling bank statements, and creating financial reports such as balance sheets and income statements. Bookkeepers are responsible for ensuring that financial data is entered accurately and in a timely manner.

The overall objectives of the bookkeeping are:

       1 - Completeness – all transactions are recorded

       2 - Cutoff – transactions are recorded in the period in which they belong to

       3 - Accuracy – transaction amounts are recorded correctly

       4 - Classification – transactions are recorded under the appropriate category

Accounting, on the other hand, involves a broader set of activities beyond bookkeeping. Accounting involves interpreting and analyzing financial data to provide insights into the financial performance of an organization. This includes creating financial statements, analyzing financial ratios, preparing tax returns, and providing financial advice to management. Accountants are responsible for understanding and applying accounting principles and standards to provide accurate and meaningful financial information to decision-makers within an organization.

The overall objectives of accounting are:

     1 - Financial information reflects the true picture of the business

     2 - Information presented in such a way that can help in making business decisions

     3 - Information presented in such a way that can help in establishing internal controls

     4 - Information can provide a meaningful comparison

Overall, bookkeeping is more focused on the accurate recording of financial transactions, while accounting involves a broader set of activities that provide insights into the financial health of an organization.