Home Business What is the Difference Between Bookkeeping & Accounting?

What is the Difference Between Bookkeeping & Accounting?


Bookkeeping and accounting seem synonymous to many (especially those who don’t come from a commerce background). But actually, they are not!  Despite growing from the same root, they both are different branches of the massive finance tree and serve different purposes. Simply put, bookkeeping collects, organises and relays the raw material to accounting to process it further into a meaningful final product for the management. Basically, bookkeeping sits at the bottom of the business and is a foundation of accounting. Both bookkeeping and accounting are important business functions with some distinctions. Allow us to straighten out how bookkeeping and accounting are distinct from each other.

Bookkeeping Explained

The process of summarising, recording and maintaining all financial transactions in the original books of entry of a business chronologically is termed bookkeeping. Zeroed on the day-to-day financial activities and transactions of a business, the bookkeepers are qualified to maintain and record the books of accounts with all the financial transactions such as payment of taxes, sales revenue, loans, interest income, payroll and other operational expenses, investments, etc. in a systematic manner. The books of account need to be accurate and up to the minute as they are the base of accounting, footing decision making in business. Known bookkeeping chores include but are not limited to-

  • Issuing invoices to customers/clients
  • Recording cash receipts from customers
  • Documenting invoices from suppliers
  • Paying suppliers
  • Logging changes in inventory
  • Processing payroll
  • Processing petty cash transactions

Accounting Explained

The process of interpreting, analysing, summarising and reporting the company’s day-to-day financial transactions is known as accounting. Outlining precisely the company’s financial position, operations, and cash flows over an accounting period, the financial statements such as the income statement, statement of cash flows and balance sheet prepared by accountants help managers and business owners in taking important decisions. In words of one syllable, it’s an accountant’s job to consolidate the financial information provided by the bookkeeper in such a way that stakeholders can easily comprehend it and make informed decisions. The financial statements maintained and compiled by way of accounting help stakeholders assess the performance of a company. Common accounting duties include but are not limited to:

  • Preparing accounts and tax returns
  • Monitoring spending and budgets
  • Auditing and analysing financial performance
  • Financial forecasting and risk analysis
  • Advising on how to reduce costs and increase profits
  • Compiling and presenting financial and budget reports
  • Ensure that financial statements and records comply with laws and regulations
  • Keeping account books and systems up to date

Common Differences Between Bookkeeping & Accounting

Bookkeeping and accounting both help the business assess its worth and take future decisions. The table of differences given below is sure to make it easier for you to apprehend the common distinctions between the two terms.





Bookkeeping is the act of maintaining and recording all financial transactions in the original books of entry of a business. Accounting is the process of interpreting, analysing, summarising and reporting the financial transactions of a business.

Source of Information

Bookkeeping uses the proofs of transactions such as invoices, bills, receipts, etc. for the recording of financial activities in a chronological and systematic manner. Accounting uses financial data compiled by a bookkeeper to interpret, classify, analyse, report and draw meaningful conclusions.


Bookkeeping commonly consists of payroll, invoicing, receipts & bills. Accounting typically consists of financial statements & reports, budgets, tax returns, analysing business performance.

Target Audience

Bookkeeping organises financial transactions for accountants to process them further. Accounting crystallises financial information to make it understandable and clear for all stakeholders/ managers/business owners.

End Product

Financial data in an organised form. Financial reports and statements such as the income statement, statement of cash flows and balance sheet.


Bookkeeping is a foundation/base of accounting. Accounting is the basis of finance management and business decisions.


The key part that bookkeeping plays in an organisation is maintaining a general ledger, a basic document featuring the amounts taken from sale and expense receipts. The functions of bookkeeping are-

·         Recording of financial transactions in a consistent way

·         Posting debits and credits

·         Generating invoices

·         Preparing financial statements as mentioned above

·         Maintaining and balancing subsidiaries, general ledgers, and historical accounts

·         Completing payroll

The primary function of the accounting process is analysing financial reports to help business owners make necessary decisions by-

·         Preparing “adjusting entries” (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process;

·         Reviewing company financial statements; Analysing costs of operations;

·         Completing income tax returns

·         Assisting the business owner in comprehending the impact of financial decisions


The bookkeeping process is in line with the accounting conventions and concepts. Accounting procedures and methods for interpreting and analysing financial reports can differ from one entity to another.
Nature Bookkeeping is clerical in nature. An individual does not necessarily have to possess any special knowledge or skill to become a bookkeeper if they are good with numbers. Accounting demands analytical and problem-solving skills and other specific skills along with the knowledge of various accounting practices and policies. For many individuals, bookkeeping is the gateway to the accounting sector.
Objective Bookkeeping aims at summarising the effect of all financial transactions of a business for a given period. Accounting focuses on interpreting and analysing financial information to facilitate informed decision-making.
Scope Bookkeeping is the initial stage of shifting the numbers and amounts into the relevant books of accounts. It is one segment of the whole accounting system. Accounting begins where the bookkeeping ends and has a wider scope than bookkeeping. It is a high-level process that utilises financial data collected and systematised by a bookkeeper or business owner to design financial models.

Bookkeepers & Accountants

Although the roles and responsibilities that bookkeepers and accountants perform vary, they both often work in tandem. After all, they both aim at helping businesses to maintain timely and accurate records of their finances. Whether you need to hire just a bookkeeper or accountant or both depends upon the size of your business and your financial needs. A bookkeeper working for smaller enterprises might carry out some basic accounting functions while bigger organisations prefer to hire both on staff in order to achieve the efficiency that comes only from expert brains and hands.

Outsourcing professional accountants from external sources in Dubai periodically to help with analysing financial operations at specific times is also a common practice adopted by most small companies. You may get in touch with Adam Global Dubai for any sort of bookkeeping & accounting services. In addition to business setup support, licences, permits, long-term residency & visa assistance, tax filing & audit assistance, office fit-out help, corporate secretarial services in Dubai, UAE, Adam Global, your one-stop-shop in LLC Company Formation in Dubai also has experts and specialists to deal with your bookkeeping and accounting needs so, you can make the right decisions to keep your business on an upward trajectory.

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