Difference between Accounting and Bookkeeping

Difference between Accounting and Bookkeeping

Bookkeeping and accounting are both tools used to record business transactions. The two are often confused as they are both associated with outgoing and income funds. Though accounting and bookkeeping have many similarities, they are different from each other. To comprehend what separates bookkeeping from accounting, you must understand both categories and their everyday use.


Bookkeeping involves recording the business transactions and indicate the relationship between these transactions. This process is mechanical and does not need any analysis. Instead, bookkeeping relies only on the recording of the data related to all daily transactions (Also see Challenges in bookkeeping and ways to deal with them).

The bookkeeping process involves recording the outgoing transactions including paying for particular bills such as electricity bills, water bills, and more and recording information regarding the incoming transactions – payments received from debtors that could be in the form of cheques or cash.

Note that there are two types of bookkeeping: double entry and single entry bookkeeping. The double entry bookkeeping involves making an entry on the debit side of the ledger and a balancing entry on the credit side of the ledger for each transaction. On the other hand, single entry bookkeeping each transaction can be recorded either on the credit or debit column depending on what type of transaction it is.

Here are bookkeeping activities

  • Keeping a consistent record of invoices from suppliers
  • Recording any changes in the inventory
  • Issuing invoice to customers
  • Processing payroll
  • Processing the petty cash transactions (Also see Importance of a Petty Cash Book)
  • Keeping a record of invoices from suppliers
  • Recording receipts from customers


Accounting involves recording, interpreting, classifying, analyzing, reporting, and summarizing financial data of an organization. From this definition, it is clear that bookkeeping is part of accounting, and therefore, accounting process involves interpreting the bookkeeping information, compiling it into financial reports that can be presented to the management.

Here are the accounting activities

  • Creating accounts
  • Creating the general ledger
  • Drawing the financial statements including trial balance, cashbook, cash flow statements, and more
  • Issuing customized financial management reports
  • Changing the classification or of certain transaction to meet particular accounting standards
  • Designing the record keeping and archiving regarding the financial data
  • Compiling the tax returns from the financial information

The most important part of accounting is the analysis of the transaction data and delivering the analyzed financial data to the management. These reports are used to evaluate the current financial status of the business, forecasting, and planning.

Other Differences Between Accounting And Bookkeeping

Accounting aims at preparing, measuring, analyzing, interpreting the financial statements, and presenting this information to the management. Bookkeeping is geared towards keeping a record of all revenues and expenditures to create accounting ledgers.

While accounting is done to determine how the company is performing, bookkeeping is concerned with where the business’s money is being earned from and utilized.


If you do to have a clear understanding of the relationship and differences between accounting and bookkeeping, it is advisable to engaging an accounting firm in Johor Bahru to make sure that all your accounting and bookkeeping activities are carried out efficiently. Check out the benefits of outsourcing the accounting function.

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