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Financial Accounting vs. Bookkeeping
Accounting is the art of recording financial or business transactions in a methodical
manner. So as to show their relation to each transaction and the state of the business in
which they occur; summarizing, analyzing, verifying, and reporting the results. Accounting
is the art of keeping accounts. It is a ridged definition, but it is exactly what accounting is,
it is more than just memorizing terms and procedures; its a whole new way of thinking
about finances, The person who knows HOW will always have a job. The person who
knows WHY will always be his boss. A bookkeeper knows how, but an accountant or
sophisticated user of financial statements knows why.
Now, as we delve deeper into the differences between accounting and bookkeeping we
must keep in mind that to be a successful accountant you must be a successful bookkeeper.
Bookkeeping is the process of recording and summarizing the economic transactions of an
entity. Entities use bookkeeping because it provides organized and accurate information
about their financial transactions. Bookkeeping is closely linked to accounting but it deals
mainly with recording information. While accountants do these activities, they also
perform other duties such as interpreting the financial statements and installing
information systems. The day-to-day record keeping involved in this process is the
bookkeeping. Accounting allows for the design of accurate financial reports that are
valuable to managers, regulators, and all stakeholders in the business.
There are three words that separate bookkeeping from accounting: judgment, analysis and
evaluation. By doing these three things it enables decision makers to understand the
