Bookkeeping and Accounting

What is Bookkeeping?

What is Accounting?


Bookkeeping vs Accounting

What is the difference between bookkeeping and accounting?

What is the difference between a bookkeeper and an accountant?

Above are some of the questions addressed in this article, and a little bit more information.




Bookkeeping, by its pure definition, is: “a process of recording transactions of a business”.
This definition explains that the job or bookkeeping is limited to the recording of the transactions only. A bookkeeper would record the accounting transactions in the accounting system of the organization. Be it a manual accounting system or a computerized accounting system, whatever.

These accounting transactions may be receipts of payments. So, when a customer makes a payment, a bookkeeper would record this transaction in books of accounts of the company by debiting cash or bank account and crediting customer account. The bookkeeper (or the cashier) would issue a receipt to the customer for the payment received.

A bookkeeper is a person who keeps the books of the accounts of the company, i.e., he makes sure that the books of the accounts of the company are appropriately maintained, transactions are recorded correctly and updated as and when required.

The bookkeeper may not necessarily have to select debit and credit accounts in the system. Nowadays, many accounting systems are capable enough to create double entries. For example, the bookkeeper would only select ‘issue receipt’ option in the accounts software, and the system would automatically debit and credit respective accounts.




Accounting: “is an art of recording, summarizing and presenting financial information in a manner which is easy to understand and reliable”.

Now, you can see that accounting includes bookkeeping. In addition to bookkeeping, there are some additional roles covered by accountants. They not only record accounting transactions, but they also do some further work. Once bookkeepers record all the transactions for a period, they’ll summarize these accounting transactions and then present them in the form of financial statements. These financial statements include balance sheet (statement of financial position), profit and loss account (income statement, statement of changes in equity (SOCE) and statement of cash flows (or cash flow statement, as previously called).

So in accounting and bookkeeping, the following tasks will be done:

  1. Identification of a financial transaction
  2. Recording of the identified transaction
  3. Summarizing the accounting transactions (at a given period end)
  4. Preparing the financial statements
  5. Presenting the financial statements

The first two points in the above list are in the domain of bookkeeping, while the remaining three are in accounting only. Thus, we can say that an accountant is a person who not only records the accounting transactions but also summarizes these transactions and prepares financial statements for presentation to the owners and other readers of financial statements.


Some additional points

While we are trying to differentiate accounting and bookkeeping, please note that many employers require the persons who can do both. Many job ads specify the words ‘accounting and bookkeeping’ or ‘bookkeeping and accounting’. Nowadays, you may find very fewer jobs, specifically for bookkeeper only. Although, still many people are working in corporate worlds whose role is solely to record the transactions like payments made, receipts collected, prepaid accounting entries, accruals accounting entries, PDCs recording etc. Even in some MNCs, there might be one dedicated person for recording collections only.

Modern accounting systems have automated most of the bookkeeping tasks, and are successfully handling the function of a bookkeeper. For example, if you go to a retail shop and purchase an item. The shopkeeper would tag the item in point of sale system (POS). This POS system is linked with the accounting system of the retail business. POS would automatically record the accounting entry for this transaction in the accounting system. Thus, there is no need to recruit a bookkeeper to record sales transactions in the retail business.

Roles of accountants have been increased significantly with the enhancements in the financial reporting standards. Accountants (Accounting managers, chartered accountants, chief accountants, etc.) are required to comply with applicable accounting standards like US GAAP and IFRS. With the increase in the regulations and new accounting standards being issued and changes being made to the existing standards, there is an increased demand for the professionals who understand and can apply these accounting standards in real life and complex scenarios.

The role of accountants is evolving in line with the increase in advancement of technologies, complexities of organizations, the globalization of businesses and the invent of new technologies and products. Accountants are required to ensure that they correctly assess, classify, record and present the transactions in the relevant accounting period in a complex business environment. Correct presentation of the financial statements would enhance reliability on the financial statements. This feature is of pivotal significant as many investors and shareholders make investment decisions using these financial statements. Please read our article on financial statements here.

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