What is the Difference between bookkeeping and accounting?

Bookkeeping and accounting are related but distinct activities in the field of finance and accounting. The main difference between the two is the scope of the activities and the level of analysis and decision-making involved.

Bookkeeping refers to the process of recording and classifying financial transactions in a systematic manner. It involves recording transactions such as sales, purchases, payments, and receipts in a set of records known as a general ledger. The main purpose of bookkeeping is to provide an accurate record of financial transactions that can be used to produce financial statements such as a balance sheet and an income statement.

Accounting, on the other hand, involves using the information recorded in the bookkeeping process to analyze and interpret financial information, make informed business decisions, and report the financial results to stakeholders. Accounting includes activities such as preparing financial statements, analyzing transactions and financial data, identifying trends, and making recommendations to improve business performance.

In summary, bookkeeping is the process of recording financial transactions, while accounting is the process of analyzing, interpreting, and reporting on financial information. The two are closely related, but the focus of each activity is different. Bookkeeping is focused on recording transactions, while accounting is focused on analyzing and reporting on financial information.