Bookkeeping represents a process of recording actual transactions of a business. Bookkeeping does not involve any analysis of the accounting data. Bookkeeping is an integral part of accounting, and thus, it prepares necessary financial information for accounting. Bookkeeping includes recording, classifying and summarizing data.
Traditional Bookkeeping was a technical (i.e. mechanical, manual) aspect of recording, classifying, and summarizing a transaction. It means that bookkeeping does not use any analysis during the stages of recording, classifying and summarizing accounting data.
This is being replaced by Cloud Accounting Software which has automated the manual Bookkeeping processes. The Bookkeeper’s role has changed to consistent data collection and reconciliation to ensure accurate numbers are available daily.
Accounting is a more complex concept that means reflection of the results of transactions according to the principles, standards, and statutory requirements in the financial statements and other business reports.
The stages of Accounting include:
- summarising; and
- interpreting accounting data.
Recording is the stage of the accounting cycle when transactions are recorded in the books.
Classification means sorting transactions into meaningful groups. Summarising consists of accumulation and systematization of accounting data.
Interpretation refers to processing and analysing financial data (e.g. financial statements or budgets prepared) for further decision making.