Bookkeeping means maintaining the books of accounts of a company, which include recording the financial transactions that take place in a company to keep a record of all the activities that take place during the working of the company. Accounting on the other hand summarizes, interprets the transactions so recorded. The transactions so recorded must be financial.

For Example: ‘A’ buys goods worth Rs.1000 is a financial transaction. C employs D as a worker in his company; here this transaction does not include any flow of goods or money which makes such a transaction as non-financial.

Importance of Bookkeeping

1. Helps in maintaining books of accounts
2. Helps in decision making
3. Provides information about cash flow
4. Helps in calculating expenditure and profits

Importance of Accounting

1. Ensures all statutory compliances of the company
2. Helps in budgeting
3. Helps in forecasting
4. Provides quantitative information to all related and interested parties

Role of Accounting

Important features of Accounting include:

1. The Statement of Profit and loss ensures the profits or losses incurred by the company.
2. The Balance Sheet ensures to provide the correct financial position of the company in terms of its assets and liabilities.
3. The Cash Flow Statement ensures the inflow and outflow of cash in the company.

Bookkeeping process:

The process of bookkeeping includes the following steps:

1. Identify the nature of the transaction, whether financial or non-financial.
2. Recording of financial transactions.
3. Preparation of Ledger Accounts.
4. Maintain Trial Balance.

Accounting process

The process of accounting further includes a few other steps besides of steps of bookkeeping are as follows:

1. Preparation of financial statements that are Statement of Profit and Loss Account and Balance Sheet.
2. Preparation of Cash Flow if any.
3. Analysis of Financial Statements.

Accounting norms

Companies select methods of accounting between an Accrual basis and Cash basis. According to Accrual basis, a transaction is recorded in books of accounts whether or not cash is received whereas as per Cash basis, a transaction is recorded in the books only when the cash is received.

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Key updates

Accounting and bookkeeping have been made easier with the introduction of computerized methods or software for performing such functions such as Tally, Fresh Books, Pabbly, Xero, etc This has broadened the scope of bookkeeping and accounting. Bookkeeping and accounting require an accountant for its maintenance. Moreover, these functions facilitate such information for internal and external interested parties.