Description

1. Accounting: Accounting is the process of recording, summarizing, analyzing, and reporting financial transactions of a business. It involves several key activities:
   • Recording Transactions: Every financial transaction, such as sales, purchases, expenses, and payments, must be accurately recorded in the accounting system. This process typically involves journal entries.
   • Classifying Transactions: Transactions are categorized into various accounts, such as assets, liabilities, equity, revenue, and expenses. This classification helps in organizing financial data for reporting and analysis purposes.
   • Summarizing and Reporting: Periodically, usually at the end of a month, quarter, or year, financial transactions are summarized into financial statements. These statements, including the income statement, balance sheet, and cash flow statement, provide an overview of the business’s financial performance and position.
   • Analysis and Interpretation: Accounting data is analyzed to assess the financial health of the business, identify trends, and make informed decisions. Financial ratios and other metrics are often used for this purpose.
   • Compliance: Businesses must comply with various accounting standards and regulations, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), depending on their jurisdiction and industry.
2. Bookkeeping: Bookkeeping is the foundation of accounting and involves the systematic recording of financial transactions. It focuses on the day-to-day tasks of maintaining accurate and up-to-date financial records. Key aspects of bookkeeping include:
   • Recording Transactions: Bookkeepers record transactions in journals or ledgers using double-entry bookkeeping principles. Each transaction affects at least two accounts, with one account debited and another credited.
   • Maintaining Ledgers: Ledgers serve as the primary records of accounts, such as cash, accounts receivable, accounts payable, and inventory. Entries from journals are posted to the appropriate ledger accounts.
   • Reconciling Accounts: Bookkeepers reconcile accounts regularly to ensure that the balances in the accounting records match the actual balances. This process helps identify errors and discrepancies.
   • Generating Financial Reports: Bookkeepers prepare basic financial reports, such as trial balances and income statements, to monitor the financial performance of the business.