Differences Between Accounting and Bookkeeping

Doing Business in Indonesia: Differences Between Accounting and Bookkeeping

Bookkeeping is the systematic identification and recording of business transactions and financial events affecting a company. When we say transactions, we’re talking about the trading activities of buying and selling that needs to be recorded in the book of records. The financial events, however, are those circumstances that may change the value of business like theft or damage to property.

Accounting is a more advanced domain. It’s the process of classifying, interpreting, summarizing, and reporting on transactions and other financial events. Some information has to be generated in order to make better business decisions.

For example for the month of January, your company spent money on an advertisement hoping to increase the company sales for the year. You want to find out if there is an increase in sales for that year and whether this increase is greater than the money you spent on the advertisement. The answer to this can be generated by some accounting processes.

Accounting and Bookkeeping are intertwined. You don’t have anything to process on accounting when you don’t have a record of something you’ve done from your bookkeeping. Although they are related, there are still some differences that exist between the two.
The following are the major differences between Accounting and Bookkeeping

 

Transactions and Entries

In Bookkeeping, financial transactions are recorded and categorized. In Accounting, however, entries are being prepared and adjusted. There are times when some expenses have already occurred but not yet recorded. Because of this, you need to make some adjustments to your accounting reports.

 

Posting and Financial Statements

In Bookkeeping, Posting of debits and credits are done. The debit increases the asset or expense accounts and decrease liability and revenue. It is recorded at the left of the T-Account. The credit, however, does the reverse of debit and it is recorded at the right of the T-Account. In Accounting, finally, financial statements are being prepared.

 

Invoices and Tax Returns

In Bookkeeping, invoices are being produced and sent. An invoice is what you make to bill your customers after you’ve given them your products and services. It also states the amount and terms of payment they need to render. The tax part of this transaction, however, will be processed in Accounting. Tax returns are generated eventually.

 

Main Activity

In Bookkeeping, the main activities are the maintaining and balancing of subsidiaries, making of general ledgers, and recording of historical accounts. In Accounting, however, the main activities are the generation of financial analysis and strategy.

 

Payroll and Tax

In Bookkeeping, payroll is being completed. Payroll can be defined as the list of people for salary payment or it could the money that is used for paying salaries. When a person earns a salary, it is subject to tax, which is done in Accounting. Tax strategy and planning is executed to offer better compensation to the employees. If the company doesn’t want to tax much the employees, it can give allowances instead, which are not subject to taxes for some countries.

 

Record Keeping and Financial Forecasting

In Bookkeeping, recordkeeping is done. In Accounting, however, financial forecasting is being processed.

 

Credentials

In Bookkeeping, the credentials of a bookkeeper don’t need a college degree. He or she may simply take a short course in bookkeeping and pass the trade test for that, specified in the country where he or she took the course. In Accounting, however, the credentials of an accountant should be a college graduate of Accounting and must be a passer of a CPA Exam. In some other countries, additional requirements may be required. For example, if you want to audit the financial statements of cooperative businesses, some countries may require you for accreditation from their Cooperative Development Authority.

 

Do You Need a Good Company to Provide You with an Excellent Accounting and Bookkeeping Services in Indonesia?

If you are looking for bookkeeping experts in Indonesia, we at 3E Accounting would like to help by providing you good and quality bookkeeping services. Your decision to choose us will be the best decision ever as we always commit to give excellent services.

We can’t wait to serve you. You can use the Contact Us of this page to reach us.