Book-Keeping & Accountancy

Dear all,

 

Bookkeeping is the process of recording the business transactions and the relations between the transactions. The process of bookkeeping is mainly mechanical and does not require any analysis. Instead of the analyzing the bookkeeping relies only on the recording of the information. Basically the process of bookkeeping is consists of recording of the incoming transactions (receipts in form of money or cheques from customers, etc.) and the recording of the outgoing transactions (payments for purchases etc.)

 

Accounting also involves systematic recording of business transactions but it also includes additional reports and further financial analysis of the transactions. Accounting besides the recording of the financial transactions also does the preparation of statements, liabilities of the assets and the various results of the whole business. Basically, accounting uses the bookkeeping information, interprets the data and compiles it into reports and presets it in a form of reports to the management beneficial for decision making or for regulatory purposes.

 

Therefore mere updation of purchase book, sales book, cash book, bank book etc is a part of book keeping and subsequent preparation of Profit & Loss Account, Balance Sheet, Cash flow and other statements would form part of accounting. People normally tend to forget the difference between these terms and therefore are often used interchangeably.

 

 

 

 

CA Rahul Joglekar

Partner

Gokhale & Sathe

Chartered Accountants