INTRODUCTION:
Accounting and bookkeeping are two key financial processes in which companies track expenses, incomes, and overall financial position. Bookkeeping involves recording daily transactions, but accounting involves financial analysis and interpretation for effective decision-making. Acquaintance with these processes can make both individual and companies manage financials effectively.
What is bookkeeping?
Bookkeeping is a careful record of a corporation's financial dealings. It involves having financial books in a correct and updated position, and such books serve as a basis for accounting processes.
Key Functions of Bookkeeping
Recording all financial dealings (purchasing, sales, expenses, and collections)
Maintaining ledgers, financial statements, and journals
Reconciling bank statements with financial books
Managing accounts payable and accounts receivable
Generating invoices and tracking payments
What is Accounting?
Accounting
Accounting goes one stage further than bookkeeping through financial information analysis, aggregation, and interpretation. Bookkeeping information is utilized in preparing financial statements and in advising companies in planning and compliance with taxes, by accountants.
Key Functions of Accounting
Preparing financial statements (balance sheet, income statement, and statement of cash flows
Conducting financial analysis and forecasting
Ensuring tax compliance and preparing a tax return
Managing budgets and financial planning
Identifying financial trends and opportunity
Importance of Accounting and Bookkeeping
Financial Transparency: Ensures companies maintain a transparent picture of their financial position.
Legal Compliance: Helps companies maintain compliance with financial laws and taxes.
Budgeting and Planning: Supplies key information for financial planning and forecasting
Decision-Making: Helps make sound financial and investment decisions for companies.
Business Growth: Sound financial management enables increased profitability and long-term survival.