The relationship between Bookkeeping and accounting is finance-related activity that are a must for every business. On one hand, bookkeeping takes care of the records of financial transactions while on the other hand, the accounting task is responsible for the interpretation, classification, analysis, report, and summary of financial data. And this is what distinguishes accounting from bookkeeping.
True they both deal with finance-related data and require fundamental accounting knowledge. But at the same time, these two functions are poles apart and have their own set of advantages. For more on the relationship between accounting and bookkeeping, keep on reading the article.
What is Bookkeeping?
Bookkeeping is a finance-related activity that contains all of your financial information and transactions maintained on one platform or software. In other words, Bookkeeping is the process that will record and keep a track of all your financial transactions regardless of amount size.
Whether you run a small business or a huge enterprise, adopting proper and efficient bookkeeping practices will let you be flexible in keeping the required financial information on books so that you can make necessary operating, investing, and financial decisions.
All of these activities will be usually taken care of bookkeeper. They have the power to keep your finance-related activities in check. More often than not, Bookkeeping tends to overlook the complete business’s financial and transactional information. Bookkeepers update each and every transaction that the business makes to vendors, 3rd-party administrators, basically everyone.
Accurate bookkeeping is extremely vital to external users such as stakeholders, financial institutions, or even the government. It is also useful for efficient tax filing. In addition, bookkeeping will help other companies or investors who want to make investments or lending decisions.
What is Accounting?
Coming to Accounting-related activities, Accounting is a process that follows stringent guidelines to track, maintain, measure, analyze, identify, classify, and summarize the financial information of your business. Honestly, Accounting involves a lot of other activities and it is a broad term to be used just for one activity.
Accounting also takes care of the profit and loss your business experienced in the last year. Current capital, assets, liabilities, and many others are also taken care. All of the accounting activities are managed by an accountant who is responsible for initiating and implementing all these tasks.
How are Accounting and Bookkeeping connected with each other?
There always has been something common between accounting and bookkeeping fields and that is primarily due to the reason they both come under one department and that is managing the financial information of the business. Even though the actual activities are different, both accounting and bookkeeping require sound financial knowledge, basic accounting skills, and the need to keep up with the current trends in the market.
Bookkeeping and Accounting as One Domain
The accounting and bookkeeping activities are now being managed using one platform. With more and more modern and cutting-edge tools and technologies are being developed for B2B and B2C. Accountants and bookkeepers need to make sure the correct transactional flow remains constant. And that is why they both are sometimes used interchangeably and already taking over each other’s part.
There is no denial in saying that both accounting and bookkeeping services play their role in keeping the financial status of the company safe and secure. Especially, small and medium-size businesses profit a lot from bookkeeping services.