ACCOUNTING & BOOKKEEPING

Accounting and bookkeeping are essential components of financial management that help businesses track and manage their financial transactions, ensuring accuracy and compliance with regulations. While often used interchangeably, they have distinct roles within the financial realm.

Accounting:

Accounting is a broader field that encompasses the systematic recording, analysis, and interpretation of financial information. Its primary purpose is to provide stakeholders, such as management, investors, and regulators, with a comprehensive understanding of a company's financial health. Accounting involves the preparation of financial statements, including the income statement, balance sheet, and cash flow statement, which summarize the financial performance and position of a business. Professional accountants use Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) to ensure consistency and transparency in financial reporting.

Key activities in accounting include:

• Recording Transactions: Accountants record financial transactions, categorizing them based on accounting principles to create an accurate financial record.
• Financial Reporting: Financial Reporting: Generating financial statements that offer insights into a company's profitability, assets, liabilities, and cash flow.
• Auditing: Examining financial records to ensure accuracy, reliability, and compliance with regulations.

Book keeping:

Bookkeeping is a subset of accounting that involves the day-to-day recording of financial transactions. It is the systematic process of maintaining accurate and organized financial records, including income and expenses, sales and purchases, and other financial activities. Bookkeepers use a general ledger to record and categorize transactions, creating a foundation for the financial statements prepared by accountants.

Key activities in bookkeeping include:

• Recording Transactions: Documenting daily financial activities, such as sales, purchases, and expenses, in ledgers or accounting software.
• Reconciliation: Ensuring that financial records match bank statements and other financial documents to identify and rectify discrepancies.
• Financial Organization: Organizing financial data systematically for easy retrieval and reference.