Difference Between Bookkeeping and Accounting Definations
Bookkeeping and accounting are two terms that are often used interchangeably, but they are different in practice. Here is the difference between the two:
Bookkeeping is the practice of recording and tracking financial transactions. It is used to record and organize the financial activities of a business, including sales, purchases, receipts, payments, and other transactions. Bookkeeping is the foundation of any financial record keeping system, and it can be done manually or electronically. The goal of bookkeeping is to provide accurate and reliable financial information for decision-making.
While Accounting is the practice of recording, classifying, summarizing, analyzing, and interpreting financial information. It is used to provide financial information to stakeholders such as investors, creditors, and management. Accounting is typically divided into two main categories: financial accounting and managerial accounting. Financial accounting focuses on the reporting of a company’s financial information, while managerial accounting focuses on the internal use of the information for the purpose of making decisions
Difference Between Bookkeeping and Accounting as a Service
Bookkeeping services provide an important function for businesses of all sizes. They are responsible for maintaining accurate records of financial transactions, tracking income and expenses, preparing financial statements and reports, and managing accounts payable and receivable. Bookkeeping services can help businesses maintain accurate records, stay in compliance with tax laws, and make informed financial decisions. They can also provide valuable insights into the financial health of a business and provide information needed to create budget plans and financial forecasts.
Accounting services involve preparing and analyzing financial records, preparing financial statements, maintaining records, preparing tax returns, and providing financial advice and consultation. These services can be provided by a certified public accountant (CPA) or a professional accounting firm. Common services include bookkeeping, payroll processing, budgeting, and financial forecasting. Other services may include preparing financial statements, developing and managing internal controls, and handling audits. Accountants may also provide advice on how to reduce costs, increase profitability, and make better financial decisions.
Types of Accounting Services
Financial Accounting
Financial accounting is the process of recording, summarizing, and reporting financial transactions of a business to internal and external stakeholders. Financial statements are generated from the data collected by financial accounting, and include the balance sheet, income statement, statement of cash flows, and statement of changes in equity. Financial accounting is used to ascertain the financial health of a business, assess performance, and make decisions about the allocation of resources.
Managerial Accounting
Managerial accounting is a branch of accounting that provides financial and non–financial information to managers for use in the decision–making process. It is a tool used to help business owners and managers make sound financial decisions. Managerial accounting focuses on the internal operations of a business, including budgeting, cost analysis, forecasting, and more. It is more focused on the short–term decisions that need to be made on a regular basis. Managerial accounting can include topics such as analyzing financial statements, analyzing operating costs, understanding pricing strategies, and optimizing inventory levels.
Tax Accounting
Tax accounting is the practice of preparing accounting records for taxation purposes. It includes the tracking of income, expenses, deductions, and credits, as well as the filing of federal, state, and local tax returns. Tax accounting also involves planning and forecasting taxes, managing tax compliance and minimizing tax liability, as well as analyzing the potential tax implications of business decisions.
Auditing
Auditing services refer to the activities performed by an auditor to obtain and evaluate evidence to determine and report on the accuracy, fairness, and completeness of financial statements and related information. Auditing services include the examination of financial statements, internal controls, compliance with laws and regulations, and other matters relevant to the financial reporting process. Auditing services also include the evaluation of the effectiveness of the internal control system, the assessment of the effectiveness of the risk management system, and the assessment of the reliability of the financial reporting process.
Cost Accounting
Cost accounting is a form of managerial accounting that is used to analyze the costs associated with running a business. It involves tracking and recording the costs associated with producing goods or services, as well as determining the cost of each unit of production. Cost accounting can help a business to better understand the costs of production and identify potential areas of cost savings. It also helps to provide detailed information about the profitability of different products, services, or projects.
Forensic Accounting
Forensic accounting is a specialty field of accounting that involves the use of investigative skills and techniques to examine financial records in order to detect fraud or other financial crimes. Forensic accountants are responsible for uncovering financial evidence and working with law enforcement to investigate and prosecute fraudulent activities. They may also provide expert witness testimony in court proceedings. Forensic accountants may also provide consulting services to businesses and organizations to help them identify and prevent fraud and other financial crimes.
Governmental Accounting
Governmental accounting is the field of accounting that deals with the preparation of financial statements and other financial reports for governmental entities. It is similar to other types of accounting, but there are some important differences. Governmental accounting is usually based on a modified accrual basis of accounting and requires the use of different types of fund accounting, such as general funds, special revenue funds, and capital projects funds. Governmental accounting also includes the reporting of activities related to government grants and contracts, as well as certain trust funds and permanent funds.
Types of Bookkeeping Services
General Ledger Maintenance
This type of bookkeeping service involves creating accurate ledgers and maintaining them on a regular basis. This includes recording transactions, reconciling accounts, and preparing financial statements.
Payroll Services
This type of bookkeeping service involves preparing payrolls, including calculating wages and deductions, and making sure taxes are paid on time.
Accounts Payable/Receivable
This type of bookkeeping service involves managing accounts receivable and accounts payable, including tracking invoices and payments.
Bank Reconciliation
This type of bookkeeping service involves reconciling bank statements to ensure accuracy and compliance with financial regulations.
Inventory Management
This type of bookkeeping service involves tracking and monitoring inventory levels and costs.
Tax Preparation
This type of bookkeeping service involves preparing tax returns and preparing documents for filing.
Financial Forecasting
This type of bookkeeping service involves providing advice and guidance on future financial plans and strategies.
Conclusion
In summary, bookkeeping is the process of recording financial transactions, while accounting is the process of analyzing, interpreting, and reporting financial information. Contact us today for professional bookkeeping and accounting services in Nairobi Kenya.