Accounting For Dummies®, 4th Edition

3.1. Bookkeeping and Beyond

NOTE

Bookkeeping refers mainly to the record-keeping aspects of accounting; it is essentially the process (some would say the drudgery) of recording all the information regarding the transactions and financial activities of a business (or other organization, venture, or project). Bookkeeping is an indispensable subset of accounting. The term accounting is much broader, going into the realm of designing the bookkeeping system, establishing controls to make sure the system is working well, and analyzing and verifying the recorded information. Accountants give orders; bookkeepers follow them.

You can think of accounting as what goes on before and after bookkeeping. Accountants prepare reports based on the information accumulated by the bookkeeping process: financial statements, tax returns, and various confidential reports to managers. Measuring profit is a critical task that accountants perform — a task that depends on the accuracy of the information recorded by the bookkeeper. The accountant decides how to measure sales revenue and expenses to determine the profit or loss for the period. The tough questions about profit — how to measure it in our complex and advanced economic environment, and what profit consists of — can't be answered through bookkeeping alone.