Page 27 - DMGT104_FINANCIAL_ACCOUNTING

Book-Keeping Accounting
Accounting
Basis of Difference
1. Objective
only the recording of transactions but
is to record the transactions of
economic nature.
also analyzing and interpreting the data.
2. It is a science.
2. It is an art.
2. Nature (Art or
science)
3. The scope of accounting is very wide.
3. Scope
3. The scope of book-keeping is
very limited.
4. Most of the functions of
4. Functions 1. The objective of book- keeping 1. Whereas the objective of accounting is not
4. Functions of accounting involves expert
book-keeping are now-a-days human beings in the art of analysis and
performed by machines. interpretation.
5. Accounting 5. Book-keeping is just one part 5. Accounting involves the entire process
Process of accounting process. of accounting that is why it is said that
Unit 1: Introduction to Accounting
accounting begins where book-keeping
ends.
6. Rules to be 6. Rules of accounting are 6. Along with rules, assumptions and
followed followed for recording. conventions are also there to follow.
7. Net Results 7. Net results of the business 7. Whereas accounting is used to find out Notes
Profit or loss cannot be known from net results of the business.
book-keeping.
8. Time 8. Transactions are immediately 8. Transactions are generally recorded
recorded. after a gap of time or at the end of a
financial year.

1.8 Summary
 Accounting is the medium of recording the business activities and considered as a language
of business.
 Accounting is the art of recording, classifying and summarizing in a significant manner
and in terms of money transactions and events which are, in part at least, of a financial
character, and interpreting the results thereof.
 Identification of financial transactions, recording, classifying them into different groups,
summarizing them into trial balance and preparation of financial statements and analyzing
and interpreting them, are included in the accounting process.
 Financial accounting, cost accounting, management accounting, responsibility accounting,
tax accounting, inflation accounting, etc., are the branches of accounting. Accounting is an
art as well as a science.
 Accounting is done for the following objective:
 For maintaining the systematic records
 For ascertaining the profit/loss of the business
 To present the financial position
 To provide the financial information
 Accounting plays an important role in the determination of profit, financial position, tax
liability, valuation of goodwill and shares and comparative study.

1.9 Keywords

Accounting Conventions: Customs and traditions which guide the accountants to record the
financial transactions.
Accounting Process: It includes the recording of financial transactions, ledger posting, preparation
of financial statements and analyzing and interpretation of them.
Cost Accounting: Accounting relating to the ascertainment of cost of the product.
Management Accounting: Presenting of accounting information in such a way as to assist the
management in taking the important decisions and making the policies.

1.10 Review Questions

1. Accounting is the process of recording, classifying and summarizing of accounting
transactions. Explain.
2. What are the key internal and external users of accounting information?
3. State the key branches of accounting.
4. Is there any difference between book-keeping and accounting?

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