Accounting and bookkeeping are closely related fields, but they have distinct functions:
- Bookkeeping: This involves the systematic recording of financial transactions, such as sales, purchases, receipts, and payments. Bookkeepers maintain accurate records of these transactions to ensure that financial statements are reliable. The primary tasks include:
- Recording daily transactions.
- Reconciling bank statements.
- Managing accounts payable and receivable.
- Producing financial reports like trial balances.
- Accounting: Accounting encompasses a broader scope and involves analyzing, summarizing, and reporting financial data. Accountants use the information provided by bookkeepers to prepare financial statements, conduct audits, and offer insights into financial performance. Their tasks often include:
- Preparing financial statements (income statements, balance sheets, cash flow statements).
- Conducting audits to ensure accuracy and compliance with regulations.
- Providing financial analysis and planning.
- Advising on tax matters and financial strategy.
In summary, bookkeeping is the foundational process of recording financial transactions, while accounting involves interpreting and using that data to provide a broader financial perspective.