Difference between Bookkeeping and Accounting

difference between bookkeeping and accounting

Many use the terms bookkeeping and accounting interchangeably, but the truth is that the former is the first step to the latter, that is, bookkeeping is the stepping stone of accounting. The scope of the two processes concerned, Accounting is much broader and analytical than bookkeeping. Bookkeeping is just a part of accounting, which creates the basis for accounting.

While bookkeeping emphasizes recording transactions so that work is clerical. On the other hand, accounting is all about summarizing recorded transactions, which requires a high level of subject knowledge, expertise, analytical skills, conceptual understanding and so on.

Bookkeeping is more transactional and administrative in nature, relating to the recording of financial transactions. Accounting is more subjective, giving you business insight based on accounting information.

In this guide, we will explain the functional differences between bookkeeping and accounting as well as the differences between the roles of bookkeepers and accountants. Before we discuss the differences between bookkeeping and accounting, here’s a little description of bookkeeping and accounting.

Definition of Bookkeeping

The process of complete and systematic recording of the financial transactions of a company or organization by the bookkeepers is known as bookkeeping. It is the activity of maintaining complete documentation of each entity’s financial transactions to form the basis of the accounting process. The purpose of bookkeeping is to reveal a true picture of income and expenses at the end of the accounting period.

Bookkeeping duties are carried out by bookkeepers who are responsible for recording daily business transactions such as cash in and out, goods sold or purchased on credit, expenses incurred, etc. in an orderly manner.

The bookkeeper records transactions in a diary such as purchases, sales, purchase returns, sales returns, cash books, journals, etc., and posts them in the related ledger, after which a trial balance is prepared.

There are two methods of Bookkeeping:

  1. Single Entry system of Bookkeeping
  2. Double Entry system of Bookkeeping

Definition of Accounting

Accounting is simply a business language that provides information about the financial status of a company or organization. This is a complete procedure that starts from recording transactions and ends at reporting financial statements at the end of the financial year.

In accounting, the monetary transactions of an organization are identified and recorded systematically, then grouped, i.e. similar transactions are classified into general groups and then summarized in a manner that can be presented to users of financial statements. After a thorough analysis of the financial statements is carried out which will help in interpreting the conclusions and finally communicating the results of the financial statements to the interested parties.

The purpose of accounting is to provide a true and fair view of financial statements to its users, i.e. investors, employees, creditors, suppliers, managers, governments and the general public in such a way that it is easy for them to understand for a particular finance.

The branches of accounting are:

  1. Financial Accounting
  2. Cost Accounting
  3. Management Accounting
  4. Human Resource Accounting
  5. Social Responsibility Accounting

Key Differences Between Bookkeeping and Accounting

The points given below are substantial, as far as the difference between bookkeeping and accounting is concerned:

  1. Books keep proper records of the entity’s financial transactions. Accounting records, measures, categorizes, summarizes, evaluates, and reports entity transactions in the form of financial statements.
  2. Bookkeeping duties are carried out by bookkeepers while accountants carry out accounting tasks.
  3. Financial statements are part of the accounting process but not the bookkeeping process.
  4. Accounting records are taken as the basis for making managerial decisions unlike bookkeeping records, where decision making is difficult.
  5. Bookkeeping is the first step towards Accounting.
  6. Bookkeeping does not disclose the true financial position, but for accounting purposes assists users in showing a true and fair view of the financial status and profitability of the organization.


Bookkeeping serves as a platform for Accounting procedures because bookkeeping is the initial or early stage of accounting. Therefore, Bookkeeping is an inseparable part of Accounting. Bookkeeping acts as the basis for Accounting and if bookkeeping is done properly, then the accounting should also be perfect and vice versa. Bookkeeping duties are clerical duties. Therefore, a little knowledge of trading is sufficient for that, while the task of accounting is analytical so in-depth knowledge in this area is required.

The organized financial records and balanced finances produced by bookkeepers, coupled with smart financial strategies and accurate tax filing by accountants, contribute directly to the long-term success of any business.

Some business owners learn to manage their own finances, while others choose to hire a professional so they can focus on the areas of their business that they really enjoy. Whichever option you choose, investing — whether it’s time or money — into your business finances will help your business grow.