What is Bookkeeping? And What is the Difference Between Bookkeeping and Accounting?

Nov 26

4 min read

All companies strive for development and growth, and this requires the focus and time necessary to achieve it. However, managerial bookkeeping (or accounting bookkeeping) is one of the tasks that consumes both time and effort. Furthermore, hiring an in-house accountant to perform this task might not be a cost-effective option, as it will increase your expenses, yet bookkeeping remains a task that can never be overlooked.

Learn with us about: What is bookkeeping? And what is the difference between bookkeeping and accounting? At Accounts Quality, we provide you with a clear vision of your financial situation and contribute to your ability to make sound decisions that lead to increased business profits.

1. What is Accounting?

Accounting is a discipline that encompasses a set of principles and rules used to analyze financial operations, then summarize and convert those operations into categorized data in the form of reports.

These reports show the result of an entity's operations—whether profit or loss—for a specific financial period, in addition to stating its financial position at the end of that period.

Accounting forms the backbone of companies. It is a discipline used to collect and organize the financial data of individuals and institutions, which helps them understand their financial data and ensure compliance with international financial standards.

Accounting consists of two basic elements:

Bookkeeping
Financial Analysis

Accounting also helps in organizing financial data, which facilitates effective business management by providing essential information such as:

Knowing the profitability of the business.
The amount of money the company owes to creditors (liabilities).
The amount of money that customers owe to the company (receivables).
The amounts of taxes that must be paid, and other figures.

What Does Accounting Provide to Companies?

Management Accounting provides companies with the necessary information for decision-making, planning, and business control, such as:

Investment decisions.
Budgeting.
Performance measurement.

For this reason, accounting is a reliable process for recording, organizing, and analyzing financial information, which helps the company's management understand its financial position and make informed decisions.

3. What are the Components of Bookkeeping?

Journal (General Journal):
Financial transactions are recorded here in chronological order.
Ledger (General Ledger):
Transactions are organized by account (Cash, Banks, Customers/Receivables, Suppliers/Payables, etc.).
Trial Balance:
Comparing the balances at the beginning and end of the accounting period to ensure debits equal credits.
Financial Statements:
Preparation of the final financial reports (Income Statement, Statement of Financial Position/Balance Sheet, Statement of Cash Flows).

4. What is the Difference Between Bookkeeping and Accounting?

If you intend to handle the bookkeeping for your own company, you can learn about the most important differences between bookkeeping and accounting here:

Accounting is a discipline that encompasses a set of principles, fundamentals, and rules used to analyze financial operations when they occur, record them from their supporting documents, then categorize and classify these operations, and summarize them. This enables the company to determine its revenues, the cost of generating those revenues, and subsequently derive the result of its operations (profit or loss) for a specific financial period, and state its financial position at the end of that period.
Bookkeeping involves recording a company's financial operations in various ledgers and deriving the results of those operations according to accounting principles.
In contrast, the science of Accounting is concerned with studying the principles, fundamentals, and rules relied upon by the bookkeeper when recording financial operations, alongside interpreting, presenting, and analyzing these results.
The most important thing to know about the difference between bookkeeping and accounting is that the science of Accounting does not stop at recording entries and extracting the results of financial operations. Instead, it extends to providing an interpretation of those results, and furnishing administrative decision-makers with information and data that goes beyond what the bookkeeper provides.

What is the Role of the Bookkeeper? And What is the Role of the Accountant?

The Accountant is the one who establishes the accounting system, defines the financial operations, records them, and provides the financial reports and data to the decision-maker.
The Bookkeeper is the one who records the financial data according to the generally accepted accounting principles.
The Accountant's role is more comprehensive than the bookkeeper's role, as the accountant establishes the accounting system, while the bookkeeper only performs the recording of transactions.

6. Frequently Asked Questions (FAQs) on Bookkeeping and Accounting:

Is Accounting the same as Bookkeeping?
They are certainly not the same. Bookkeeping focuses on recording financial transactions and organizing the accounting records with accurate data, while Accounting focuses on financial analysis and providing reports to help companies make the correct decisions.
How is Bookkeeping performed?

It is performed by recording all financial operations in the Journal (Journal Entries), then posting them to the Ledger (General Ledger), and finally transferring them to the Trial Balance.
What is the difference between Books and Accounting Records?
Bookkeeping is considered a part of the accounting records. Accounting records are broader and more comprehensive, as all financial operations are recorded and documented within them.

Conclusion:

Accounts Quality , headquartered in the Kingdom of Saudi Arabia, offers outstanding accounting services, including bookkeeping, for various types of small and medium-sized enterprises (SMEs), through an organized, smooth, and convenient process.

Through our services at Quality Accounting, you can monitor your financial matters periodically, at any time and from anywhere in the world.