The Basic Differences Between Accounting And Bookkeeping

While the terms accounting and bookkeeping may appear to be interchangeable, they serve different purposes: Bookkeepers keep track of financial transactions, while accountants decipher what this data means for the company. For a small business owner, knowing the difference between bookkeeping and accounting is critical because both are necessary for making educated decisions.

What Is Bookkeeping and How Does It Work?

The process of recording daily transactions in a company’s financial records is known as bookkeeping.

It entails acts such as:

  • Posting transaction debits and credits to the general ledger
  • Maintaining subsidiary ledgers and historical accounts and balancing them
  • Invoice creation
  • Suppliers’ payments
  • Payroll check calculation and preparation

What Is the Importance of Bookkeeping?

The core of the accounting process is bookkeeping, which generates the data that accountants use for financial analysis and report creation.

To make judgments, business owners rely on the accuracy of these financial accounts. Managers may make incorrect decisions if the data entered by bookkeepers is erroneous or inconsistent.

What Is Accounting and How Does It Work?

Accountants use the data gathered by bookkeepers to compile financial statements, KPIs, and reports that provide information about the company’s operations.

The following are some basic accounting tasks:

  • Preparation of the company’s financial statements
  • Cost of operation analysis
  • Metrics of performance calculation
  • Tax returns must be completed.
  • assisting the owner of a firm in making sound financial decisions

Differences Between Accounting And Bookkeeping:

Accounting reports, financial statements, and performance measures give the business owner a greater grasp of the company’s actual profitability and cash flow. Owners, on the other hand, rely on accountants for more than just reporting figures. They also rely on their accountant’s financial forecasting expertise to assist them to make important business decisions.

Accounting’s foundation/base is bookkeeping.    Accounting prepares financial reports and statements based on the information provided by bookkeeping.
Bookkeeping is a component of the accounting system as a whole.    Accounting differs from bookkeeping in that it begins where bookkeeping stops and has a greater scope.
The end outcome of the bookkeeping procedure is accounting input.      Accounting produces financial statements, which are used to make educated decisions and judgments.  
  The goal of bookkeeping is to preserve a chronological record of all financial activity and transactions.    Accounting’s objective is to disclose a company’s financial strength and to obtain the results of its operations.
  A bookkeeper is a person who is in charge of bookkeeping.  An accountant is a person who is in charge of accounting.
Bookkeeping is a clerical job. No special expertise or skill is required of bookkeepers.  Accounting necessitates accountant abilities, as well as an understanding of numerous accounting, practices, and policies.
The bookkeeping process does not include financial statements.The accounting procedure is used to create financial reports and statements.  
The accounting norms and concepts are followed during the bookkeeping procedure.  Accounting procedures and methods for understanding and analyzing financial reports differ by an entity.
Bookkeeping does not reveal a company’s financial situation.  Accounting aids in presenting a clear picture of a company’s financial status.  
No advanced knowledge is required.  Understanding and analyzing accounting principles necessitates advanced schooling.
The information offered by bookkeeping is insufficient for making decisions.    Accounting data can be used by management to make key choices.


Because bookkeeping is the first step or birth of accounting, it serves as a platform for the accounting procedure. As a result, bookkeeping is inextricably linked to accounting. Because bookkeeping serves as a foundation for accounting, it is assumed that if records are properly kept, the accounting will be excellent as well, and vice versa. Moreover, bookkeeping is a clerical profession. As a result, a basic understanding of commerce is sufficient, whereas accounting is an analytical endeavor that necessitates a complete understanding of the subject.