It is a common mistake to interchange the works “bookkeeping” and “accounting.” Although similar, these words have distinct, different meanings. Bookkeeping is the process of recording daily financial transactions of a company. This includes the record of sales, expenses, cash, and bank transactions. The action of recording all of these transactions is known as “posting”. The complexity of a company’s bookkeeping mainly depends on the magnitude of a firm and their transactions. On the other hand, accounting is “measuring, processing and communicating financial information” of a firm. Accounting aims to create a record of a firm’s financials and it interprets the bookkeeping to discover the financial wellbeing of a firm. This can be seen in the financial statements, like the balance sheet, income statement, and statement of cash flows. Another purpose of accounting is tax preparation.

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