Introduction to Bookkeeping and Accounting

Back to: FINANCIAL ACCOUNTING SS1

Welcome to class!

In today’s class, we will be talking about the introduction to bookkeeping and accounting. Enjoy the class!

Introduction to Bookkeeping and Accounting

At the end of the lesson, you should be able to;

• Define Book-Keeping and Accounting
• Differentiate between Book-Keeping and Accounting
• Justify the study of Financial Accounting

Bookkeeping:

Book Keeping 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.

Accounting:

Accounting is the act of recording, classifying, analyzing, summarizing, interpreting and communicating financial information of an organisation to various end-users of such information.

Differences between bookkeeping and accounting

1. Book-keeping concentrates only on the routine recording of transactions while accounting goes beyond the aspect of recording to classify, analyse, summaries 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 few months) compared to an accountant (about five years).
4. Book-keeping records are mainly for internal use in an organisation while accounting records are 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 bookkeeping 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 as 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 comparison among businesses and comparing recent financial results with past financial results.
9. Properly kept records are used for planning purposes i.e. setting of targets and determining the best ways to achieve them.

Self-evaluation:

1. List five benefits of book-keeping and accounting.
2. State four duties of an accountant in a business organisation

Reading assignment

Simplified and Amplified Financial Accounting Page 1 – 7

Weekend assignment

1. The systematic recording of business transactions in monetary terms is auditing    B. book-keeping   C. debiting    D. crediting
2. Financial accounting information is for internal use only     B. external use only       C. business use only    D. internal and external use
3. Which of the following is not a purpose of financial accounting determining profit    B. fixing prices     C. credit dealings    D. determining cash balance
4. The fourth stage of the accounting information system is recording     B. summarizing    C. interpreting      D. classifying
5. The double entry principle of accounting was developed by Frank Wood      B. Akintola Williams    C. Luca Pacioli     D. William Pickles

Theory

1. What is book-keeping?
2. Give five reasons why accounting records are kept.
3. List eight users of accounting information.

In our next class, we will be talking about the History of Accounting. We hope you enjoyed the class.

Should you any further question, feel free to ask in the comment section below and trust us to respond as soon as possible.

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