Bookkeeping and accounting are the core assets of a developing or developed economy. Bookkeeping and accounting are two functions that are extremely important for every business organization. When the economy is hit with a crisis, then accounting and bookkeeping could only have the capacity to restore it back on track. Bookkeeping and accounting are very important if you need to elevate your nation’s economy and payroll management. Businesses identify both of them as two guardian of the company that can never be discarded.
In the simplest of terms, bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data. Bookkeeping and accounting may appear to be the same profession to an untrained eye. This is because both accounting and bookkeeping deal with financial data, require basic accounting knowledge, and classify and generate reports using the financial transactions. At the same time, both these processes are inherently different and have their own sets of advantages. Read this article to understand the major differences between bookkeeping and accounting.
What is Bookkeeping
Bookkeeping is basically a method or strategy to contain your financial information or transaction on a single platform. In layman terms, Bookkeeping is the procedure of recording your financial transaction on sheets. By adopting a proper bookkeeping channel, companies, corporates and businesses become very flexible in storing the necessary financial information on their respective books to make key operating, investing, and financing decisions.
Bookkeepers are the stakeholders or care persons of managing the Bookkeeping process. Without them, Bookkeeping is nothing. Bookkeeping overlooks the entire company’s financial and transactional data. They update each and every transaction, the company engages with. Without bookkeepers, companies would not be aware of their current financial position, as well as the transactions that occur within the company. Accurate bookkeeping is also crucial to external users, which includes investors, financial institutions, or the government – people or organizations that need access to reliable information to make better investments or lending decisions. Simply put, the entire economy relies on accurate and reliable bookkeeping for both internal and external users.
What is Accounting
So coming to the Accounting term, we deduce that Accounting is a process that follows some strict systematic guidelines to record, store, measure, identify, categorize, authenticate and summarize the financial information of the corporate sectors. Accounting is a very broad term, hence the assigned tasks under the term are also very good in numbers. Accounting is responsible to predict the profit and loss of the company or business. Accounting also tells the current capital, assets, and liabilities of the companies. Besides this, the equity factors also come under the umbrella of Accounting. An accountant is an individual who is responsible for managing, initiating and executing all these tasks. To become a good accountant, you need qualification and top-notch accounting skills.
Intersection Point Between Accounting and Bookkeeping
There has always been some intersection or focal point between accounting and bookkeeping sectors. Both due to the same nature and lies under the same department that is managing the financial data of the company. Both accounting and bookkeeping deal with financial data, require basic accounting knowledge and classify and generate reports using financial transactions.
But both these terms have different ways of doing things, and their advantages and disadvantages are also not similar to each other. Both Bookkeeping and accounting have been in existence for a very long time and both fields have seen a tremendous amount of change in the way the operations are carried out. This trend will continue in a similar fashion in the future too. Some of the upcoming trends in the field of accounting and bookkeeping include –
Bookkeeping and Accounting Processes Into One Unit
The accounting and bookkeeping processes are now being transformed into one platform. With the rapid advancement in technology, cutting-edge new Softwares are being deployed in order to ensure the correct transactional flow remains constant. That is the reason that both the giant terms are taking over each other’s part. With the invention Softwares, bookkeeping can now do the part of accounting. Likewise, the accounting part could now do Bookkeeping work. So both are in the way of merging into one unit. This is good but a lot of jobs would be vanished from the market, as the software takes over their role of the job.
BookKeeping In Downtrodden
Bookkeeping functions are now going towards the end, many won’t agree to it. But it is true for sure, as we are heading towards the digital transformation, the bookkeeper will not be using any book or sheet to record the transaction as the full-fledged softwares are available that work much faster with the attributes of confidentially, scalability and flexibility. Bookkeeping will become a lot more than just data entry, balancing bank ledgers, and reconciling bank statements. These functions will slowly diminish in the coming years and may even become obsolete, as most of the tasks will be handled by bookkeeping software
New Services as the Digital Transformation takes over
So with the rapid advancement in technology, the myth of doing manual work is busting. With the arrival of latest accounting and bookkeeping Softwares, the stakeholders are also looking forward to it. It is an opportunity for bookkeepers to support their clients through this change, presenting value-added services such as payroll processing, credit card reconciliation, etc. with the help of the latest software.
Advent of Smartphones
Now the current trend is of online transactions, with the online retail and whole stores. Everybody is going online to pinch their work. Also, the advent of smartphone mobiles has become a piece of cake. The time has gone when a buyer visits your shop, once in a blue moon. Now the marketing and accounting are at your fingertips. Business owners want to access the data from anywhere in the world on different devices, and accounting and bookkeeping professionals are making sure the duly-generated reports are available online for their clients to access at all times
More Efficient Services
Consulting and advising corporations are taking full advantage of these new technologies and services due to the advancement of the analytical tools, making bookkeeping and tax preparation services more efficient and significantly cheaper.
So the bottom line suggests that both accounting and bookkeeping services play their part in doing financial activities of the company. Bookkeeping services for small business or Accounting services for small business profit a lot. As both of these terms have common properties among them. Accounting is a summary of the activities of bookkeeping and Bookkeeping is a task that needs to be done in order to execute accounting services. So they both rely on each other.