ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Personal Finance»
  • Understanding Finance

Book-keeping, Accounting and Accountancy

Updated on November 11, 2013

Book-keeping, Accounting and Accountancy



It is important to understand the meaning and function of the terms "Book-keeping", "Accounting" and "Accountancy". Let us look at the different terms separately and understand the meaning and function of these terms.

Accounting system has following two stages as per G A Lee. They are:

Stage 1. (Book Keeping) Stage one involves the collection of invoices and receipts, making vouchers and entering the financial information in the books of account as per the rules and regulations. All such transactions or events which affect the financial state of the organization comes under this stage.

Stage 2.(Accounting) This stage involves, the analysis and summarization of recorded financial events or transactions and its presentation of the same to the interested parties as well as its interpretation as an aid to decision making by the interested parties.

Stage one, i.e. making of routine records in the prescribed form as per the rules and recording them in the books of account is called Book-keeping and stage 2 i.e. summarization of record from time to time and making it available in the form of profit and loss account and balance sheet is called Accounting. Accounting starts where book keeping ends.

Book-keeping involves the following steps:

  1. Identifying the transactions and events to be recorded,
  2. Measuring them in terms of money
  3. Recording them in the books of prime entry
  4. Posting them into ledger.


Accounting involves the following steps.

  1. Summarizing the recorded data
  2. Interpreting the financial results
  3. Communicating them to the interested parties.


In practice, accountants also review and direct the work of book-keepers and therefore the term accounting is generally used in a broader sense covering all accounting activities. Hence, Book-keeping is regarded as a part of accounting.

The term "Accountancy" represent to a systematized knowledge of accounting. It is regarded as an academic subject like chemistry, economic, statistics etc. It teaches how to do the accounting and why to do the accounting and other aspects of the art of accounting.

Accounting refers to the act of accounting or the actual process of accounting whereas accountancy explains how to do the accounting.

Accountancy explains how and why to prepare the books of account and how to summarize the accounting information and how to communicate it to the interested parties.

Accountancy is a science, a body of systematized knowledge whereas Accounting is the art of putting these knowledge into practice.


However, in general, Accounting and Accountancy are used for the same meaning. But accounting is becoming more popular now a days.

Comments

    0 of 8192 characters used
    Post Comment

    • profile image

      cooper cook 5 years ago

      I never knew that book-keeping and accounting were in the same category. Because whenever I heard of the term book-keeping I always just assumed that it was someone who owned or worked in a bookstore or library. Not that book-keepers were actually accountants, well now I can say that I know. http://www.yepezbookkeepingandtax.com/

    • cheetah786 profile image

      cheetah786 5 years ago

      really informative tutorial. it can build base for book keeping for new stdents.

    • Iamsam profile image
      Author

      Iamsam 5 years ago

      Thanks yeagerinvestments for stoping by and commenting.

      Thanks a lot.

    • yeagerinvestments profile image

      yeagerinvestments 5 years ago from Wisconsin

      Good information for anyone to know, especially business owners.