Popova V.A., Usachev V.A.

Donetsk national university of economics and trade

named after Mikhail Tugan-Baranovsky

Accounting and Bookkeeping

Bookkeeping means keeping basic financial records, tracking and providing information used by a business.

Accounting is the process of producing financial statements for a business like Income Statement and Balance Sheet.

Book keeping is the recording of financial transactions and events, either manually or electronically. While recordkeeping is essential to data reliability, accounting is this and much more.

Accounting includes identifying, measuring, recording and reporting and analyzing economic events and transactions. It involves interpreting information, and designing information systems to provide useful reports that monitor and control an organization’s activities.

The aim of accounting is to show a financial condition of a company. There are the two types of records which are the most important ones.

It is the income statement on the one hand and the balance sheet, on the other hand.

Bookkeepers perform a critical function for the forms and organizations they serve. Regularly challenged to maintain precise and accurate records, bookkeepers produce the vital reports that keep management up to date on the financial condition of their company.

Accountants are responsible for the design and management of the financial systems that bookkeepers use. They prepare monthly financial statements and tax returns at year end. Accountants may also prepare budgets for management and loan proposals for bankers; and perform cost analysis for the company’s products or services.

Bookkeeping is procedural and is largely concerned with development and maintenance of accounting records. It is the “how” of accounting.

Accounting is conceptual. It is concerned with the “why”, reason or justification for any action adopted.

Financial Statements are the central feature of accounting because they are the primary means of communicating important accounting information to users. They, so to say, show business in financial terms.

The most important financial documents are:

1. Profit and Loss Accounts;

2. Balance Sheets;

3. Cash-flow Forecast;

Look at the accounting equation: Assets = Liabilities + Owner’s Equity.

Bookkeepers first record figures in the books or Journals. Of course the books of today are computer files. At the end of each period bookkeepers post the totals of each book into the Ledger.

Many accountants pass examinations to get special certificates. In England they are called chartered accountants, while in the USA – certified public accountants.