Accounts

Differences between Bookkeeping and Accounting

len Alfred Ajibola - Thu, 25th April, 2019 @ 10:14 AM

Topics in Accounts

Characteristics of Double Entry System Examples on the principle of double entry system Advantages and limitations of double entry system Scheme of work, Financial Accounting, SS1, Third Term Scheme of work, Financial Accounting, SS1, Second Term Scheme of work, Financial Accounting, SS1, First Term Differences between Bookkeeping and Accounting Journal: Contents, Format, Characteristics and Advantages of Journal Bank Wire and Wire Transfer Chart of Accounts Balance Sheet Reconciliations

Academic Questions in Accounts

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According to the principles of the dual entry system, an increase in asset is credited.

  • A. True

  • B. False

The followings are true on the double entry system of accounting except _____.

  • A. Errors can't be made

  • B. It can be time consuming

  • C. It can be used as an accounting reference

  • D. It can be used to control a company's expenditure

  • E. There is completion of account transaction

  • F. It isn't difficult to implement

With regards to bookkeeping and accounting, which of the following statement is incorrect?

  • A. Accounting covers the entire practice of finance management

  • B. Bookkeeping is a branch of accounting

  • C. Bookkeeping is a necessary requirement when making financial statement of account

  • D. Bookkeepers record financial transaction in a chronological order

  • E. Accountant earn higher salaries than bookkeepers

  • F. Accounting reports assist business managers in making a more detailed decision

The debited and credited accounts are written in which column of a journal?

  • A. Date

  • B. Particulars

  • C. Folio

  • D. Ledger

  • E. Amount

  • F. None of the above

A journal may also be referred to any of the following except _____.

  • A. Book of original entry

  • B. Book of primary entry

  • C. Book of first entry

  • D. Initial book

  • E. Day book

  • F. Chronological book

Which of the following statement is true concerning bank wire?

  • A. Another name for bank wire is cash transfer

  • B. The term 'wire' in bank wire signifies a computer based programmed message sent to a bank customer in regards to their account information, transaction and other important financial notifications

  • C. The International Bank Account Number (IBAN) must always be involved when carrying out a bank wire process

  • D. The term bank wire has no significant relationship with wire transfer

  • E. Cyber criminals cannot utilize bank wire threats like CSRS, phishing and whaling to achieve their fradulent act

  • F. All the above statements are true

The following are recommendations to follow during the process of balance sheet reconciliation EXCEPT _____.

  • A. All balance sheet accounts should be reconciled periodically, quarterly or annually

  • B. Comparing the trial balance of both the payables and receivables with the respective aging schedule

  • C. Analysis of enteries and relocating them to a sub-ledger if need be

  • D. Comparing the general ledger trial balance of the account to another source; for instance, a bank statement

  • E. Analysis of the differences in both accounts and making appropriate correction to ensure the correctness of entered information

  • F. None of the above


Bookkeeping and Accounting:

Although bookkeeping and accounting involves financial data, they are still quite different in functionalities.

In a large business organization, financial transactions typically occur on a regular basis and at a high rate. As a result, an accounting personnel may not be able to efficiently enter all the business transactions. For this reason, the services of a bookkeeping personnel or bookkeeper may be required.


  • Bookkeeping can be defined as all activities that involve the orderly classification and recording of financial data or business transaction.

    Bookkeeping assist the process of accounting through the process of taking an accurate record keeping.


  • Accounting covers the entire process and practice of managing the finances of an individual or an organization.

Please read on the principle of double entry here.


In smaller organizations, a bookkeeper’s job may go beyond simple transaction recording. In this regard, they may also be involved in the accounting processes of the organization. On the other hand, accountants may have to record financial transaction in addition to analyzing financial transaction.


Differences between bookkeeping and accounting

Below are some of the differences between bookkeeping and accounting:


  • Definition / Meaning

Bookkeeping: It deals with the orderly classification and recording of financial data.

Accounting: It covers the entire practice of finance management.

 

  • Scope

Bookkeeping: It is a branch of accounting.

Accounting: It is financial management in itself. It has various subset or branches. Bookkeeping is considered as one of its branches.

Please read on the meaning, scope and importance of business studies here.

 

  • Ability to take financial decision

Bookkeeping: Financial decisions cannot be taken on the basis of bookkeeping alone.

Accounting: Account records serves as the basis on which financial decisions can be taken.

 

  • Financial status of an organization

Bookkeeping: It cannot be used to determine the status or strength of an organization.

Accounting: It shows the financial strength or status of any institution.

Please read on the scope, characteristics and elements of business and management studies.

 

  • As a part of account statements

Bookkeeping: It is not necessarily required to make a financial statement of account.

Accounting: It is required in the making of a financial statement.

 

  • Associated tools

Bookkeeping: Journals and ledgers are related to bookkeeping.
Please read on journals, its characteristics and advantages here.

Accounting: Profit and loss account, balance sheet and cash flow statements are related to accounting.

 

  • Types or Methods

Bookkeeping: Single entry system of bookkeeping and double entry system of bookkeeping.

Accounting: Financial accounting, cost accounting, human resource accounting and so on.

 

  • Functions

Bookkeeping: The bookkeepers record financial transaction in a chronological order (order of occurrence). The bookkeepers are therefore considered to lay the foundation on which accountants build on.
You can read on balance sheet reconciliations here.

Note: Nowadays, softwares are present that can easily and efficiently carry out bookkeeping functions. However, the use of bookkeeping software can be quite expensive and slow. Also, the storage capacity on computers where these softwares or applications are utilized may become exhausted.

Accounting: They analyze financial transactions in order to give an accurate result and status of a business. Such reports will assist the business managers in making a more informed decision.

Please read on meanings and types of business structures here.

Some acountants may review the job done by the bookkeepers. Also, they may advise the bookkeepers on the right way to go about their job.

 

  • Salaries

Bookkeeping: They earn lower salaries when compared to accountants.

Accounting: They earn higher salaries than the bookkeepers.

Please read on clerical staff, their qualities and functions here.

 

Importance of Bookkeeping

  1. It brings accuracy into the recordings of daily business transactions.

  2. They provide the information on which financial accounts are prepared.

  3. Aside from its importance in business organizations, it can also be used by nonprofit organizations and individuals.

  4. It can also take record of liabilities, assets and loans. Such recording functions of bookkeeping can be crucial for many businesses.
    You can read on how to start a home based fish farming here.

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Amazing facts in Accounts

It is believed that bookkeeping is the only English word to contain three sets of double letters repeatedly

Notable points in Accounts

Below are the limitations or disadvantages of double entry system of accounting:

  1. Increased usage (and cost) of books of accounts.

  2. The accounting process can become complex.

  3. Mistakes are possible.

  4. Recruitment and payment of a professional may be required.

  5. It can be time consuming.

Double Entry System - Len Academy

Double entry system of accounting is defined as one that shows recorded transactions at both sides (Debit - Dr.) and (credit - Cr.) of the entries with both having equal values.

Double entry system is also termed as Dual system of accounting.

 

Please read on the advantages of double entry system here.

Bookkeeping can be defined as all the activities that have to do with the orderly classification and recording of financial data or business transaction.

Bookkeeping assist the process of accounting via the taking of an accurate record keeping.

Accountingis a field of study that covers the entire process and practice of managing the finances of an individual or an organization.

In smaller organizations, a bookkeeper’s job may go beyond simple transaction recording, as they may also be involved in the accounting process of the organization. On the other hand, accountants may have to record financial transaction in addition to analyzing financial transaction.

Please read more on bookkeeping and accounting alongside their differences here

Below are the importance of bookkeeping in any organization:

  • It brings accuracy into the recordings of the daily business transaction.

  • They provide the information on which financial accounts are prepared.

  • Aside from its importance in business organizations, it can also be used by nonprofit organizations and individuals.

  • It can also take record of liabilities, assets and loans. This function of bookkeeping can be crucial for many businesses.

Please read more on bookkeeping and accounting here

A journal, also called book of original entry or book of primary entry or book of first entry or day book or chronological book is a book where daily transactions are recorded in a chronological order (the order of occurrence).

A journal contains the total record of all transactions made by a company. It can be distinguished into different types which will include:

  • Sales Journal: For recording inventory and sales.

  • Cash Receipts Journal: For recording money received from sales or cash inventory.

  • Purchase Journal: For recording all purchases made by a company.

  • General Journal and so on.

 

The content of a journal include the followings:

  1. The date when the transaction occurred.

  2. The description of the transaction.

  3. Debits

  4. Credits

  5. Accounts affected