BOOK-KEEPING AND ACCOUNTING Bookkeeping is the recording of financial transactions.

Transactions include sales, purchases, income, and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Bookkeeping should not be confused with accounting. The accounting process is usually performed by an accountant. The accountant creates reports from the recorded financial transactions recorded by the bookkeeper and files forms with government agencies. There are some common methods of bookkeeping such as the Single-entry bookkeeping system and the Double-entry bookkeeping system. But while these systems may be seen as real bookkeeping, any process that involves the recording of financial transactions is a bookkeeping process. ! bookkeeper "or book-keeper# also known as an accounting clerk or accounting technician is a person who records the day-to-day financial transactions of an organization. ! bookkeeper is usually responsible for writing the daybooks. The daybooks consist of purchase, sales, receipts, and payments. The bookkeeper is responsible for ensuring all transactions are recorded in the correct daybook, suppliers$ ledger, customer ledger, and general ledger. The bookkeeper brings the books to the trial balance stage. !n accountant may prepare the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper. http%&&en.wikipedia.org&wiki&Bookkeeping Differences between Book Keeping and Acco nting!

BA"I" O# DI##E$E NCE ' (ature 4t

BOOK-KEEPING

ACCOUNTING

is concerned with identifying 4t is concerned with summarizing the financial transactions5 recorded them and measuring them in monetary communicating the results. terms5 recording and classifying them. 4t aims ascertaining income maintaining of business transactions. is the recoding, classifying, summarizing, interpreting business transactions and communicating results. Thus its scope is 7uite wide.

). *b+ective 4t is to maintain systematic records of financial transactions. ,. -unction

4t is to record business transactions. 4t So its scope is limited.

.. Basis

/.

0evel of 1nowledge

6ouchers and other supporting documents are necessary as Book-keeping works as the basis evidence to record the business accounting information. transactions. 4t is enough to have elementary -or accounting, advanced and inknowledge of accounting to do depth knowledge and book- keeping. understanding is re7uired. Book-keeping is the to accounting. first step !ccounting begins keeping ends. where book-

2. 3elation

$O%E O# ACCOUNTANT IN AN O$GANI&ATION !ccountants are he persons who practice the art of accounting. !ccountants can be classified into two categories% '. !ccountants in 8ublic 8ractice.

). !ccountants in 9mployment '( Acco ntants in P b)ic Practice! These are also known as professional accountants and usually are the members of professional bodies. Such two bodies in 4ndia are% '( 4:!4 "4nstitute of :harted !ccountants of 4ndia# *( 4:;!4 "4nstitute of :ost and ;orks !ccountants of 4ndia# These offer services for conducting% "'# -inancial audit ")# :os audit ",# Designing of accounting system ".# 3endering other professional services *( Acco ntants in E+p)o,+ent! These are employed in non-business or business entities. (on-business entities are a diverse set of organizations including 9ducational 4nstitutions, <overnment, :hurches, =useums, and >ospitals etc. their purpose is not to earn profit. These are generally called as management accountants because they report to, and are the part of, the entity$s management. =ost of these are the also members of professional accounting body, but it is not necessary. These provide information for% "'# Ta? returns of the business ")# Budgeting ",# 3outine operating decisions ".# 4nvestment decisions "/# 8erformance evaluation "2# 9?ternal financial reporting

Acco ntants- "er.ices '( /aintenance of Books of Acco nts% !n accountant keeps a systematic record of the transactions entered by a business in the normal course of its operation. This help the organization in ascertaining the profit and loss made for a particular period and also the financial position of the organization as on a particular date. The advantages of maintenance of a proper systematic record of all the transactions are% "a# >elps to management in % '# 8lanning and decision making% keeping in view current performance future plans of actions. )# :ontrolling% 9valuation of actual performance with respect to planned one and taking remedial action if re7uired. ,# :o-coordinating% interlinking different divisions such as production, purchase, finance, personnel and sales departments and coordinating through departmental budgets and reports. .# =otivating% 8romote or demote, reward or penalize according to the periodical departmental profit and loss accounts, budges and reports. /# :ommunicating% Transmission of data results to insiders as well as outsiders. "b# 3eplacement of >uman =emory% (o need to remember vast data. "c# :omparative study% with respect to own previous years$ performance and with other companies in industry. "d# !cceptance by ta? authorities "e# 9vidence in court% taken as good evidence in the court of law. "f# Sale of business% help in fetching a proper price in the event of sale of the business. *( A diting of Acco nts! !uditing is verification of accounting data for determining the accuracy and reliability of accounting statements and reports. This function is also performed by accountants. 4t is classified into two categories%

'# "tat tor, A dit! 3e7uired to be done because of provisions of law. :ompanies !ct re7uires every company to get its accounts audited by a 7ualified :harted !ccountant ":!#. The Statutory !udit has a report whether in his opinion the profit and loss account shows the true profit or loss for the year and the balance sheet shows a true and fair picture of the state of affairs of the business on the balance sheet date.

)# Interna) A dit! 4t is a review of various operations of the company and its records by the staff specially appointed for this purpose. =any large organizations have a separate internal audit department headed by a professionally 7ualified accountant for this purpose 0( Ta1ation! !n accountant assists his organization in reducing ta? burden and making proper ta? planning.

2( #inancia) "er.ices! !n accountant is familiar with legal, accounting and ta?ation matters so can properly advise individual firms with regard to managing their financial affairs. >e can assist his clients in selecting the most appropriate investment or insurance policy. 8rofessional accountants also provide management consulting services. Such as designing of management information system, corporate planning, conducting of feasibility studies, e?ecutive selection services etc.