Bookkeeping vs accounting definitions


Definition of accounting

There are many definitions of accounting by a number of professional bodies and authors. They all however, revolve around the activities of generating and providing accounting information to users so that they can make informed decisions.

The Committee on Terminology of the American Institute of Certified Public Accountants (AICPA), defined accounting as 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 a financial character, and interpreting the results thereof."

This definition captures the various aspects that make-up the accounting process as follows:

       i.          Recording of transactions and events in books of original entry.
     ii.          Classifying transactions through the process of posting from the books of original entry to the different accounts in the ledger.
    iii.          Summarizing the results periodically in financial reports.
    iv.          Interpreting the results of the business operation through the analysis of financial statements.

Bookkeeping and accounting

Bookkeeping is an activity within the broader activities of accounting. It is mainly concerned with the recording of routine business transactions on a day to day basis.  It is the record keeping part of accounting and through this activity a business is able to determine the results of its operations. The nature of a bookkeeper's work is clerical and may now be done using electronic equipment.  A bookkeeper may be responsible for keeping all or some of the records of a firm.

Accounting on the other hand, is concerned not only with the recording function but also with other activities including the designing of the accounting system itself.  Accountants are responsible for preparation of financial reports and statements, as well as in the analysis and interpretation of the reports.  Accountants usually supervise the work of bookkeepers, and are expected to have acquired a level of training and qualification commensurate to this position.

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