Q. What do you mean by bookkeeping?
Accounting is frequently confused with bookkeeping. Bookkeeping is a mechanical procedure that records the routine economic activities of a business. Accounting consists of bookkeeping however goes well beyond it in scope. Accountants interpret and analyze financial information, conduct audits, prepare financial statements, design accounting systems, prepare special business as well as prepare forecasts, financial studiess and budgets and provide tax services.
Exclusively the accounting process consists of the following groups of functions
- Accountants observe several activities and identify and measure in financial terms (dollars) those events considered evidence of economic activity. Frequently these three functions are collectively referred to as analyze. The sale and purchase of goods and services are economic events.
- Next the economic events are classified into meaningful groups, recorded and summarized.
- Accountants report on economic events otherwise business activity by preparing financial statements and special reports. Habitually accountants interpret these statements and reports for various groups such as investors, management, and creditors. Interpretation may perhaps involve determining how the business is performing compared to prior years and other similar businesses.