![]() ![]() This is also essential for tax audit at the end of the financial year. This updated record of transactions gives a clear idea about the performance and progress of a company or business and can determine the future plan of action for improvement. This helps to plan your future financial transactions accordingly. Regular updates of financial transitions taking place in a business, company or even household is quite essential to keep an idea about the expenses, loss and profits on a day-to-day basis. The individuals who can perform either or both activities in an efficient manner are always in demand, because every organization, whether it be, profit, nonprofit, charitable or Government needs the services of such professionals.Bookkeeping is an essential part of all financial transactions. Whether it's bookkeeping or accounting, it's ever green field, as it meets the demands of trade, commerce and industry. Hence, both ought to be there for a business to run with accuracy, efficiency and effectiveness. Merely recording the business events does not provide any results of a business. as there cannot be an activity of summarizing and analyzing and interpreting, unless the events of a business are recorded in a timely and accurate manner. The former is incomplete without the latter and vice versa. ![]() It thus may be regarded that both book keeping and accounting are corresponding to each other. ![]() It may be rightly said that the activity of accounting starts on the basis of book keeping. Further, it leads to make financial analysis and interpretation of financial information. The profit or loss (Income Statement) of a particular period, and the financial position (Balance Sheet) of a business at a particular date are ascertained with the help of accounting. The task of accounting, as it has been pointed out, necessitates interpreting the information of financial character to provide the net results thereof and the financial position of a business to the intended parties. It is therefore accounting is taken in a broader sense, as the task of accounting is performed by a person who has more authority than the one who carries out the activity of book keeping.Īccording to American accounting association, accounting has been defined as, “The process of identifying, measuring, and communicating information to permit judgment and decision by the users.” Yet another definition of American Institute of Certified Public Accountants (AICPA) is that “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character and interpreting the results thereof.” Since it is impossible to remember numerous business transactions during a period of time, book keeping rules out remembering business transactions enabling one to maintain a permanent record of each transaction.Īs regards accounting, it may be defined as the art and science of recording, classifying, summarizing and analyzing the events of financial nature. It also facilitates to perform the task of budgeting and costing including other purposes. It is on the basis of this activity that not only the financial statements are to be prepared being summarized, but also a comparative study of financial statements is to be undertaken. Bookkeeping provides accurate and complete information of business transactions. In spite of the fact that the task of book keeping is clerical in nature, it is very important activity to ascertain the net results and financial position of a business. ![]() It is concerned with recording business transactions in accordance with the principles of accountancy. In this way, book keeping is the first stage to keep up the accounts of a business entity. It thus an event that is not expressed in terms of money is not to be recorded in the books of accounting. Such as, purchase made in a shop or withdrawal of funds from a bank, sale and purchase of goods and payments of cash etc. Yet more, it is an exchange of money or money’s worth. A business transaction may be defined as an instance of doing business that affects a business showing what is owned and owed. This in turn leads to provide a presentation of complete financial information of a business organization to the required users.Īt this stage, it is important to know and understand the meaning of a business transaction. Since every business entity needs to maintain a systematic record of business transactions, the activity also includes preserving the records of business events which are of a financial character in a chronological order. This article will focus on the differences between these two and also judging which one in better. Bookkeeping and accounting both are essential functions required for a business. ![]()
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