Introduction to Bookkeeping – SS1 Book Keeping Lesson Note (First Term)

Bookkeeping is the systematic recording of the daily financial transactions of an organization so that the financial position of a business can be readily ascertained or determined at any time. 

Differences between book-keeping and accounting 

1. Book-keeping concentrates only on the routine recording of transactions while accounting goes beyond the aspect of recording to classify, analyze, summarize and interpret financial information 
2. Book-keeping is limited in scope (i.e area of coverage) while accounting has a wider scope 
3. The time required for training to be a qualified book-keeper is shorter (about a few months) compared to an accountant (about five years)
4. Book-keeping records are mainly for internal use in an organization while accounting records are for both internal and external use.
5. Book-keeping is an integral part of accounting while accounting is more complex and has book-keeping as one of its components. 

Importance of book-keeping and accounting or reasons why accounting records are kept

1. To determine the profit or loss made by the business during a particular trading period.
2. The existence of financial records helps in decision-making by managers of the business.
3. Financial records help in the prevention of fraud.
4. To assess and ascertain the financial position of the business at a particular date.
5. To determine the solvency and liquidity of a business 
6. It serves as a basis for assessing the tax to be paid by the business.
7. To ascertain the assets and liabilities of the business.
8. It is useful for making economic comparisons among businesses and comparing recent financial results with past financial results. 
9. Properly kept records are used for planning purposes i.e. setting targets and determining the best ways to achieve them.