Bookkeeping is the basic recording of financial transactions and is part of the accounting process. Accounting measures and reports on the financial affairs of an organization and provides information to stakeholders. While bookkeeping only records data, accounting analyzes the information to assess profit/loss and financial position and prepare financial statements. The objectives of both are to track assets/liabilities, determine tax liability, and facilitate auditing. Accounting software has largely replaced manual systems for more efficient bookkeeping and accounting.
Bookkeeping is the basic recording of financial transactions and is part of the accounting process. Accounting measures and reports on the financial affairs of an organization and provides information to stakeholders. While bookkeeping only records data, accounting analyzes the information to assess profit/loss and financial position and prepare financial statements. The objectives of both are to track assets/liabilities, determine tax liability, and facilitate auditing. Accounting software has largely replaced manual systems for more efficient bookkeeping and accounting.
Bookkeeping is the basic recording of financial transactions and is part of the accounting process. Accounting measures and reports on the financial affairs of an organization and provides information to stakeholders. While bookkeeping only records data, accounting analyzes the information to assess profit/loss and financial position and prepare financial statements. The objectives of both are to track assets/liabilities, determine tax liability, and facilitate auditing. Accounting software has largely replaced manual systems for more efficient bookkeeping and accounting.
Bookkeeping is the basic recording of financial transactions and is part of the accounting process. Accounting measures and reports on the financial affairs of an organization and provides information to stakeholders. While bookkeeping only records data, accounting analyzes the information to assess profit/loss and financial position and prepare financial statements. The objectives of both are to track assets/liabilities, determine tax liability, and facilitate auditing. Accounting software has largely replaced manual systems for more efficient bookkeeping and accounting.
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Overview on Accounting and Book Keeping
Introduction Accounting is the fundamental function of the every organization. Any financial transaction should be included in the accounting. Any organization cannot know its profit/loss and financial position without proper accounting system. Book keeping is the basic activity of the accounting system. Generally accounting can be seen into three major parts such as financial accounting, management accounting and cost accounting. Here mostly every organization has the financial accounting which is more needed for every organization and whatever type of organization. Profitable and non-profitable organization must have the financial accounting for its financial transaction. The book keeping system is summarized and provided the data to prepare the financial statement of the firms. Book keeping is start with double entry of the financial transaction. Every financial transaction has the double entry which is the very basic of the accounting. Generally financial accounting is prepared according to the basic accounting concept, policies, Lanka Accounting Standards (LKAS), International Financial Reporting Standards (IFRS) in Sri Lanka. According to the LKAS 1, presentation of the financial statement, a company should prepare and include the followings in its financial statement such as, Statement of comprehensive income Statement of financial position Statement of cash follow Statement of changes in equity Relevant disclosure and notes The main purpose of the preparation of the financial statement and maintain accounting system is to provide the financial information to its stakeholders. Definitions Bookkeeping is the recording of financial transactions and it is a part of the process of accounting in every organization. Generally transactions include purchases, sales, receipts and payments by an individual person or an organization. There are several
standard methods of bookkeeping such as the single-entry bookkeeping system and the double-entry bookkeeping system but vitally double entry bookkeeping system is used in all over the world. Bookkeeping is usually performed by a bookkeeper. A bookkeeper is an employee who records the day-to-day financial transactions of an organization. He or she is usually responsible for writing the daybooks which contain records of purchases, sales, receipts, and payments. The bookkeeper is responsible for ensuring that all transactions whether it is cash transaction or credit transaction are recorded in the correct daybook, supplier's ledger, customer ledger and general ledger. An accountant is the responsible person to prepare reports from the information concerning the financial transactions recorded by the bookkeeper, so the bookkeeping is very fundamental and important activity in every organization.
Accounting is the measurement, processing and communication of financial
information about economic entities. The modern field was established by the Italian mathematician Luca Pacioli in 1494. Accounting which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users, including shareholders/ owners, customers, researchers, competitors, investors, creditors, management and regulators. Practitioners of accounting are known as accountants.
Difference between Accounting and Bookkeeping
The following differences can be seen between accounting and bookkeeping Basis for Bookkeeping Accounting Comparison Bookkeeping is an activity of Accounting is an orderly recording recording the financial and reporting of the financial affairs Meaning transactions of the company in of an organization for a particular a systematic manner. period. It is regarded as the language of What is it? It is the subset of accounting. business. On the basis of bookkeeping Decisions can be taken on the basis Decision Making records, decisions cannot be of accounting records. taken. Preparation of Not done in the bookkeeping Part of Accounting Process Financial process
Basis for Bookkeeping Accounting Comparison Statements Statement of financial position, Income statement, Statement of Tools Journal and Ledgers changes in equity and Cash Flow Statement Financial Accounting, Cost Single Entry System of Accounting, Management Methods / Sub- Bookkeeping and Double Entry Accounting, Human Resource fields System of Bookkeeping Accounting, Social Responsibility Accounting. Bookkeeping does not reflect Determination of Accounting clearly shows the the financial position of an Financial Position financial position of the entity. organization.
Objectives of Accounting and Bookkeeping
Generally the following objectives can be stated by having a feasible and good accounting and bookkeeping system
To ascertain the profit or loss resulted from the business operation.
To measure the financial position of a concern by making the appropriate valuation of the assets, capital and liabilities. To know the exact amount of the debtors and creditors of a firm for a certain duration. To see the capital structures and the management of assets for analyzing the economic soundness of a firm or company example short term liquidity and long term solvency etc. To determine the tax liability example sales tax, VAT, income tax etc. by ascertaining the total sales and net income of the year. To establish an efficient financial administration for the control of all types of resources from leakage, misuse, misappropriation etc. by keeping complete records of all the transactions. To facilitate the auditing of the books of account.
To submit, as evidence, in the counts, if necessary, because the audited financial statement are the authentic and legal financial documents.
Limitation of Bookkeeping/Accounting Along with a number of important merits of book keeping and accounting, it has some demerits or limitations. The notable demerits of book keeping are mentioned below. It does not provide important but non monetary information like government policies, political situations, strike and movements etc, which affect the financial soundness of a firm. It cannot be uniformly used by the all the organization in valuation of stock, charging depreciation and maintaining provisions etc. It ignores the price level changes because the prices of goods and services are frequently changes but it records the income and expenses in historical basis, which may be more or less than the current real prices. It recognizes the value of the nominal assets like patents, trademark, preliminary expenses etc, which may not have any real value. Some of such assets may be valueless in the market but they may be shown in the statement of the financial position continuously. Such a statement of the financial position cannot show the real position of a firm or company. Conclusion Nowadays the bookkeeping system and accounting works are done by through the accounting software which was done by manually as well with help of the ledger system, so the bookkeeping system and accounting works are done very quickly, cost effectively and on correct time. However proper knowledge should be needed to use the accounting software than the manual accounting and bookkeeping activities, as well huge money also need to purchase the accounting software. According to the current world usage of the accounting software is very useful than manual system. Every organization can do the accounting and bookkeeping system with the help of the prepared excel sheet of micro soft office which is more user friendly and cost effective but firm has to develop the accounting and bookkeeping system according to its nature
and type of the business and also its necessary financial statement preparations. Generally tally and quick book are mostly used accounting software in Sri Lanka. Some firms develop own accounting software for their accounting and bookkeeping system which is more relevant for every organization. Accounting and bookkeeping is related with the past financial transactions of a firm however those activities will help to the present and future activities of every organization. Accounting is started with an individuals’ birth and ended with his or her death as well as accounting is started with an organization’s birth and ended with its dissolved because individual’s/ firm’s birth, individual’s death and firm’s dissolved can be stated through the double entry system like as, Individuals’ Birth World/ earth account debit “Child” Mothers’ stomach account credit “Child” Individuals’ death Atmosphere account debit “Breath” Person’s body account credit “Breath” Firms’ birth/ start Cash/ assets account debit Capital account credit Firms’ dissolved Capital account debit Cash/ assets account credit
