Imagine that you are a business owner trading in used car parts. Your sales and purchases are on a cash basis only. This would be simple as there would be no need to keep a record of who owes you or which suppliers you owe.
The reality is, even the smallest business is a bit more complicated than that. Other than having to keep a record of the amount of cash collected, the business owner have to keep a record of the things he owns such as stock, credit customers, building and other assets. Similarly he has to record the business expenses, amount owed to his suppliers and other debts of the business.
The reality is, even the smallest business is a bit more complicated than that. Other than having to keep a record of the amount of cash collected, the business owner have to keep a record of the things he owns such as stock, credit customers, building and other assets. Similarly he has to record the business expenses, amount owed to his suppliers and other debts of the business.
The aim of any business is to make a profit. It would not be possible for the owner to know the financial position of the business if no records are kept.
Book-keeping, is the systematic recording of a business financial transactions. The two most common bookkeeping methods are double-entry and single-entry. The information is entered in the books by a bookkeeper.
Bookkeeping is the first stage in the accounting process therefore it is very important that the information entered is free from errors.
Accounting involves the recording, classifying and summarizing of information from book-keeping records to produce financial statements that is prepared by the accountant.
The difference between bookkeeping and accounting is that book-keeping involves record keeping of all business transactions. Whereas accounting uses the information compiled in the book-keeping process to prepare financial statements that can be analyzed and interpreted.
These financial statements are not prepared for the owner alone, but for other users of financial information such as investors, shareholders, managers, creditors, and the government.
Accounting involves the recording, classifying and summarizing of information from book-keeping records to produce financial statements that is prepared by the accountant.
The difference between bookkeeping and accounting is that book-keeping involves record keeping of all business transactions. Whereas accounting uses the information compiled in the book-keeping process to prepare financial statements that can be analyzed and interpreted.
These financial statements are not prepared for the owner alone, but for other users of financial information such as investors, shareholders, managers, creditors, and the government.
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