Accounting and Book-keeping 

Ø  Book-keeping is a systematic recording of business transaction in the books of accounts

Ø  Book-keeping is the basis of accounting.

Ø  It is the art and science of recording day-to-day business transaction in books of accounts.

Ø  The process of book-keeping: identification -> Recording -> Preparing ledger -> Trial Balance.

Ø  Accounting starts where book-keeping ends.

Ø  Bookkeeping  is the  recording  of  financial   transactions  and  it is   a part of  the  process  of

Ø  Accounting in every organization.

Ø  Book keeping is the basic activity of the accounting system.

Ø  Accounting may be defined as the art of recording, classifying, summarizing and communicating the required information relating to the economic events of an organisation to the interested users of Information.

 

 

Basis of Difference

Book-keeping

Accounting

Objective

It is a process of recording of business transaction.

It is a process of recording and reporting business transaction.

Books of accounts

Journal and Ledgers

 

Journal, Ledgers,

Statement of financial position, Income

statement,   Statement   of   changes   in

equity and Cash Flow Statement

 

Decision Making

On the basisi of book-keeping decisions cannot be made.

Decision can be made.

 

 

                                           Basis of Accounting

On the basis of recognition of revenue and cost there can be two of accounting:

1.      Cash Basis.

2.      Accrual Basis.

 

1.      Cash Basis: under cash basis of accounting revenue and cost  is recognised only when cash is actually received or paid not when it become due.

               

                  For example:

(a). Goods purchased in 2020 and cash is paid on 2021. So the journal entry will be passed in   2021 when cash will be received.

(b) Goods purchased in march 2020 and cash is immediately paid. The transaction will be recorded on the same day because it involves cash.

 2.      Accrual basis: under this system of accounting revenue and cost is recognised when it occur not when it is received or paid.

 

For example:

(a)    Goods purchased on march 2020 and cash is received  in 2021. The journal entry will be passed immediately on happening of event not on receipt of cash.

 

Conclusion:

The cash basis of accounting takes into account only cash transaction but accrual bassis of accounting takes into account both cash as well as credit basis of accounting.