Is Accounting and Bookkeeping the Same?

 What comes to mind when you think of bookkeeping? Maybe it’s all just numbers and spreadsheets? But is that really all there is to bookkeeping? Answer: no. Bookkeeping, of course, involves the art of tracking all financial transactions of a business in detail. Many seek professional QuickBooks bookkeeping services for this task, so they can have an accurate view of how their business is performing. So, what does bookkeeping actually do, and what are its benefits?

What is Bookkeeping?

Bookkeeping is how you track and record your business’s financial transactions. These business activities are recorded based on the company’s accounting principles and supporting documentation, including receipts, bills, purchase orders, and invoices.

You can record these transactions in a journal by hand or use an Excel spreadsheet for easy recording. Again, QuickBooks bookkeeping services come in handy in such situations. You can use any bookkeeping software for the task.

Bookkeeping is just one part of your business record keeping. If you can manage bookkeeping well, your business can efficiently track its financial capabilities and move toward heightened profits, identify growth opportunities, and move closer to success.

Bookkeeping vs Accounting

Many think these are the same. Did you? While bookkeeping and accounting may seem interchangeable, it is easy to confuse the two. Consider accounting the umbrella under which is bookkeeping. Accounting covers all processes associated with recording a business’ financial transactions.

Bookkeeping includes recording financial transactions, processing payroll, preparing financial statements, and posting debits and credits to a journal.

Accounting includes performing audits, preparing adjusting entries, filing relevant tax returns, and reviewing and evaluating financial statements.

So, while accounting is the umbrella term, accountants wouldn’t be efficient in providing business owners with the insight they need to understand their business processes to make informed financial decisions.

2 Types of Bookkeeping for Small Businesses

There are two main types of bookkeeping: single-entry and double-entry bookkeeping.

Single-Entry Bookkeeping: If you run a small startup or are a sole proprietor, you may choose this to track cash sales and expenditures over time. With it, you must maintain:

● Cash Sales Journal: You record all business revenue.

● Cash Disbursements Journal: This is where the business records all expenses.

● Bank Statements: All journal entries must align with the bank statements.

Double-Entry Bookkeeping: Double-entry bookkeeping refers to recording transactions in at least two accounts, like credit and debit. When choosing this method, the debit amounts recorded must match the recorded credit amounts. This bookkeeping method is perfect for companies with accrued expenses. For this, you need these documents:

● Payroll

● Loans

● Inventory

● Cashbooks

● Journal entries

● General ledgers

● Accounts receivable

● Accounts payable

This system is common in QuickBooks bookkeeping services and other accounting software. With it, bookkeepers record transactions under income or expense. They can prepare a second entry to classify the transaction on the right account.