Accounting is a much broader term than bookkeeping.
Bookkeeping refers mainly to the record-keeping aspects of accounting
How to define bookkeeping?
Bookkeeping is the process of recording daily transactions in a consistent way and is a key component to building a strong business foundation.
Bookkeeping is comprised of:
- Recording financial transactions
- Posting debits and credits
- Producing invoices
- Maintaining and balancing subsidiaries, general ledgers, and historical accounts
- Completing payroll
How to define accounting?
Accounting is a high-level process that makes sense of information previously compiled, and produces financial models using that information. The process of accounting is more subjective than bookkeeping, which is largely transactional.
The process of accounting includes:
- Preparing adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process)
- Preparing company financial statements
- Analyzing costs of operations
- Completing income tax returns
- Aiding the business owner in understanding the impact of financial decisions
Today Bookkeeping and Changing Landscapes
It is interesting to note that since the advent of accounting and bookkeeping software, some components of the accounting process have been absorbed into the bookkeeping process. For instance, bookkeeping software is typically capable of building financial statements – blurring some of the traditional lines between the bookkeeping and accounting processes.
The distinction between accountant and bookkeeper keeps changing as accounting software and other software evolves, like XERO or MYOB.
For many years, companies used the title of accounting clerks for employees doing the tasks formerly performed by bookkeepers. The accounting clerks are usually supervised by an accountant.
Some business owners learn to manage their finances on their own, while others opt to hire a professional so that they can focus on the parts of their business that they really love, so was born the outsourcing service.