What is the difference between bookkeeping, accounting, and accountancy? When someone says they are an accountant, are they really a bookkeeper? Does it really matter?
Bookkeeping is the process of systematically recording the financial transactions of a business, so as to show how the transactions relate to each other. Bookkeeping is a large a mechanical process and does not involve any analysis of the financial transactions, but rather the recording of them.
Traditionally, the records were kept in a book, hence the name bookkeeping. These days, bookkeeping is normally performed using a bookkeeping software package, but the names of the books (daybook, cashbook, journal, and ledger) are still used.
A bookkeeper's function is primarily one of recording transactions in the journal and posting to the ledger, and is sometimes referred to as an accounts clerk.
There are two types of bookkeeping: single entry and double-entry. In single entry bookkeeping, the record of each transaction is charged to either the debit or credit column of a single account. In double-entry bookkeeping, two entries of each transaction are transported to the ledger: one to the debit side, and one to the credit side, of the corresponding account. This is so the two entries can be used to check each other.
Accounting is the systematic recording, reporting, and analysis of financial transactions of a business. As bookkeeping involves making a financial record of business transactions, it is true to say that the role of bookkeeping is encompassed within the scope of accounting, and the bookkeeping system used by a business would form part of the accounting system.
Accounting also includes the preparation of statements concerning assets, liabilities and the operating results of a business.
Accountancy is the occupation related to accounting, and an accountant is the person who does, or at least is responsible for, the work. Accountants often specialize in a particular area of accounting such as taxes, auditing, or management.
In a small company, all of the bookkeeping and accounting tasks may well be performed by a single person. In this situation, that person would normally be referred to as an accountant.