Accounting & Bookkeeping explained in few words.

Table of Contents

Accounting : What does it mean?

If you own a business or if you’ve been in the workforce for a while, at some point or another you’ll have to go to accounting. They’re the people who provide accounting services and manages the finances of a company and their responsibilities include recording accounting transactions, paying bills, billing clients and customers, tracking assets and expenditures, managing payroll and keeping track of critical tax documents.

Every business and every individual needs to have some kind of accounting system in their lives. Otherwise, the finances can get away from them, they won’t know what they’ve spent, or whether they can expect a profit or a loss from their business. Whether it’s for a multi-billion dollar business or a personal, checking account is a necessary activity on a daily basis. Not doing so can mean anything from a bounced cheque or posting a loss to a company’s shareholders. Both scenarios can be equally devastating.

Accounting is basically information, and this information is published periodically in business as a profit and loss statement, or an income statement.

Bookkeeping : What does it mean?

Most people would probably think that bookkeeping and accounting are same, but bookkeeping is really a part of accounting, while accounting encompasses many functions involved in managing the financial affairs of a business.   Bookkeepers usually work in small to medium sized businesses across a variety of industries. The scope of a Bookkeeper’s role and day-to-day tasks may vary based on the size of the business.

In simple terms, Bookkeepers process and records financial transactions, some of them include the following:

Recording the financial transactions of a business in bookkeeping software or spreadsheets as per requirements. The transactions includes recording of sales, purchase, expenses and losses, incomes and gains, borrowing money or buying products or raw materials for the production.
Inventory records must be updated on timely basis and must be double-checked to ensure that they’re as error-free as possible.
Preparing Bank reconciliation statements.
Reporting irregularities if any and producing balance sheets, income statements and other financial documents.

Financial Accounting : What does it mean?

It is a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period. These transactions are summarized in the preparation of financial statements, including the balance sheet, income statement and cash flow statement, that record the company’s operating performance over a specified period. It is generally used by stockholders, suppliers, banks, employees, government agencies, business owners, and other stakeholders.

Financial statements must conform to accounting standards and legal requirements. In the U.S., the Financial Accounting Standards Board (FASB) establishes financial accounting and reporting standards (generally accepted accounting principles, or GAAP).

  • Systematic recording of transactions.
  • Ascertainment of result of above recorded transactions.
  • Ascertainment of the financial position of business.
  • Providing information to the users for rational decision-making.
  • To know the solvency position.