Instruction: Difference between Bookkeeping and Accounting.

Ans: Bookkeeping is the process of maintaining and recording all financial transactions in the
original books of entry of a business. The bookkeeping process involves summarizing and
organizing all the company’s financial transactions chronologically in a systematic manner.
Bookkeeping focuses on the day-to-day financial activities and transactions of a business.
The bookkeepers maintain and record the books of accounts. All the financial transactions
such as payment of taxes, sales revenue, loans, interest income, payroll and other operational
expenses, investments, etc., are recorded in the original books of accounts. The books of
account need to be up-to-date as it is the basis for accounting. The accuracy of bookkeeping
determines the accuracy of the accounting process followed by a business.

Accounting is the process of interpreting, analyzing, summarizing and reporting the financial
transactions of a business. The financial statements prepared in accounting are a precise
summary of financial transactions over an accounting period. These statements summaries a
company’s financial position, operations, and cash flows. Accounting consolidates financial
information to make it understandable and clear for all stakeholders. It helps businesses to
maintain timely and accurate records of their finances. The accountant maintains and
compiles the records of a company’s daily transactions into financial statements such as the
income statement, statement of cash flows and balance sheet. The financial statements help to
assess the performance of a company by all stakeholders.