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Similarities and Differences between Accounting and Bookkeeping Many a times, bookkeeping is mistaken for accounting. Accounting is the systematic means of identifying, maintaining documents, classification, assessing and communicating financial information over a given amount of time so as to understand the losses and gains of a company whereas book keeping is a part of the procedure in accounting through record of financial transactions. Book keeping provides information essential for preparation of accounts. Both processes have their similarities and differences as outlined below. Similarities Records
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In both accounting and book keeping, records are very important. Book keeping requires daily noting down for easy accessibility when it comes to preparing accounts and accounting requires the records for preparation and analyzing of financial statements.
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Classification From the daily transaction records, they are classified into various books i.e. bank publication that’s used to document the deposits and withdrawals made, buy book for those records of all purchases made on credit, money book used for the purpose of documenting all cash payments such as trade payables like trade payables and petty cash purchases and money receipts like trade receivables and cash sales and finally the sales book by which non-cash sales are listed together with client’s key specifics and later transferred into the customer’s account. Differences Tools used Accounting makes use of the income statement, balance sheets And even cash flow statements because its most important tools while in book keeping journals and ledgers are utilized. Financial statement preparation While publication keeping does not require any preparation of financial statements, accounting is largely the preparation of these financial statements like balance sheets, profit and loss statement and cash flow statements. Management role The management is not involved in book keeping but they’ve A particular interest in accounting documents since it’s helpful in checking on the operation of an organization and making of future choices based on that info. Decision making Whereas information provided by book keepers cannot be solely used to make decisions, accounting information plays a major role in making decision making in a firm. Job role Book keeper’s roles are mainly to collect, record and classify information relating to financial transactions while accounting requires more skilled personnel to interpret and communicate the implications for decision making. Skills needed Accounting is a bit complicated therefore it requires particular Skills while on the other hand accounting doesn’t require any specific skills because of its simple nature. Categories Accounting is categorized into cost, management and financial Accounting among other classes while reserve keeping is categorized into single entry and double entry. A lot of people tend to confuse book keeping and accounting to be the same thing. However, since we have seen in this paper the two processes Share some common features and as well have their differences that differentiate one from the other.