Difference Between Bookkeeping and Accountancy Homework Answers
It is not uncommon to see the words â€˜Bookkeepingâ€™ and â€˜Accountancyâ€™ being used interchangeably in a sentence.Â More or less they convey a similar idea, but in no way are they completely synonymous. Most people apply these two words interchangeably while speaking or writing without the proper knowledge of the individual terms. This leads to considerable confusion and skepticism. That is the exact reason why students are presented with the distinction of the terms in the early stages of studying commerce.
To common people, these two terminologies probably convey the same meaning. In practice, there is a crucial difference between Bookkeepers and Accountants, however fine the line of distinction is. This is a complex subject matter, and many people search the internet for difference between bookkeeping and accountancy homework answers to get a good grip on the concept.
Let me first explain the two terms individually to clarify the words.
What does Bookkeeping mean?
To put it in simple words, bookkeeping is nothing but the process of keeping or maintaining books. Of course, the books are Books of accounts viz. the primary books like the journals and the secondary books like the ledgers and trial balances. Apart from these, there are the financial statements and reports that are required to be maintained by the companies to comply with rules and laws.
These are however not an exhaustive list of books of accounts, and there are numerous books and statements kept by an enterprise largely depending on the size and complexity of its business. The companies and corporate are mandatorily required to maintain books of accounts by virtue of some legal statutes.
How are books kept or maintained?
While seeking difference between bookkeeping and accountancy homework answers students choose to read through the two terms very superficially. But in order to get the concepts clear an in-depth analysis is much needed. That brings us to the actual process how books are kept by enterprises. The process isnâ€™t as easy and simple as it sounds.
Getting to the core of this subject:
- Transactions are first recorded or captured from vouchers and invoices, to be entered chronologically in the primary books such as Journals and Daybooks.
- Where accounts are maintained electronically the data is put into the ERP system of the enterprise as and when some transaction takes place.
- These journals are then posted into the ledger account heads and the Cash book. They are further posted to the respective sub ledgers if at all required.
- Payments are received from customers and recorded in the sundry customer’s
- Payments made to vendors are also reflected in the books in a similar way.
- The company also maintains a huge payroll and dealings with the employees also get recorded.
Keeping a detailed account of the books
The person responsible for recording these sales, purchase or payments related transactions as mentioned above is known as bookkeepers. As bookkeeping is a very mechanical job and it does not require analysis of accounts and figures, a person having just the primary knowledge of accounting can act as a bookkeeper for a small or medium size business.
However, the generally accepted accounting principles and practices should be known to the individual. An application of wrong accounting principle might lead to wrong and erroneous postings and calculations.
What does Accountancy mean?
The scope of accountancy is much wider and larger. It encompasses the method and practice of recording, arranging, sorting, classifying,summarizing and analyzing the data so recorded.
Accounting data are recorded maintained and used by the enterprise for interpretation of the year round transactions entered into by it. The data are utilized by various stakeholders of the enterprise such as suppliers, creditors, employees, government, investors and the management.
It is thus not the mere record keeping but is a detailed and complex business study which forms the foundation of every business. Accounting information which is a product of accountancy is an asset of the enterprise. It serves the following major functions:-
- It reflects the profit earned or the loss incurred by an enterprise.
- It presents the financial position of the enterprise.
- It projects the liquidity position of the business.
- The short term and the long term solvency of the enterprise are also ascertained through accounting information.
A thorough knowledge about the concept of accountancy is needed to get difference between bookkeeping and accountancy homework answers and the idea can be further clarified by online experts who are always ready to help students with this topic.
Sub-Branches of Accountancy
Accountancy is an enormous field, and it is a rather vague term. There are several divisions of the subject such as:-
It is associated with financial transactions and used to ascertain the profit or loss sustained by the business. As a result, the users of financial accounting are mostly the owners and the internal stakeholders who are concerned with the profitability of the business.
Financial accounting principles are guided by accounting conventions, generally accepted accounting principles and accounting standards issued by the Institute of chartered accountants of India and the finance ministry of India. Various decisions are taken on the basis of financial accounting information such as valuation of business investment decisions and economic decisions.
Cost and management accounting:
This branch of accounting is mostly used by the management to take decisions relating to production and manufacturing. It identifies gathers and analyses data relating to cost for a particular cost unit. There are several costing methods such as absorption costing and marginal costing methods. This field also enables management to prepare budgets and standards. A much recent development in this field is that of ABC costing method.
This is a process to verify the accounts of a business enterprise. An auditor states with reasonable accuracy whether the books of accounts and financial statements of an enterprise project a fair view of the financial stature. There are multiple auditing techniques to check the genuineness of accounting information.
It is an ancillary field to pure accountancy and deals with both direct and indirect taxation. Tax returns are filed with the government every year and taxes paid accordingly. Difference between bookkeeping and accountancy homework answers can be written if the idea mentioned above is completely clear to the students.
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