Bookkeeping - Accounting - Objective of Accounting - Forms of Business

Bookkeeping Definition

Bookkeeping is the keeping of books of accounts in a systematic way. It is the first part of Accounting. We record daily transaction in it.

Example: Mr. A sold goods to A for Rs. 500. We record this transaction in Book or Journal. Recording aspects of this transaction is called Bookkeeping.

Bookkeeping has two types because there are Debit and Credit in Accounting which an accountant and Bookkeeper must consider while recording Transactions in the books of accounts.

Types of Bookkeeping

1. Double Entry System of Bookkeeping

In which Double Entry System is followed. For Every Debit accounts, there must be Credit accounts in an Entry.

               

2. Single Entry System of Bookkeeping

In which Single Entry System is followed. Either only one aspect of transactions is recorded or Debit and Credit accounts are not completely recorded in the books of accounts.

Note: You may also interested in Single Entry Bookkeeping Vs Double Entry Bookkeeping

Now, Lets us consider accountant and bookkeeper differences at the basic level.

                      Bookkeeping                  VS                  Accounting

1.Bookkeeping is a narrow term while Accounting is a wider term.

2. It is merely recording aspects of transactions whereas Accounting starts after book keeping we not  only record transactions but also classify, summarize and interpret the results.

Comparison / Difference Between Accounting and Accountancy

                          Accounting Vs Accountancy

Accounting is a narrow term in relation to Accountancy, because it is only the branch of Accountancy.

While Accountancy is a wider term that not only deals with Accounting but also deals with Cost Accounting, Auditing and other theories and practices.

Types of Accounting or Branches of Accounting

For getting an accounting degree online, students can apply for online college classes. There are Financial Accounting Classes, Cost Accounting Classes which are conducted online. Students can also get Managerial Accounting Certification Online. For this purposes, Online Accounting Degree California is famous in the United States. You can visit California College San Diego's Business School.

Here we discuss the following branches:

• Financial Accounting
• Cost Accounting
• Managerial Accounting

  Ø  Financial Accounting

In Financial Accounting, we make financial statements like Trading & Profit & Loss Account, Balance Sheet, Cash Flow Statements, Statements of Changes in Equity and Note to the accounts. Students can get Financial Accounting Degree if they are interested in this branch of Accounting.

     

  Ø  Cost Accounting

If we want to know the cost of every unit or cost of the entire units of production, then it is called Cost Accounting. Similarly if you want to specialize in this branch, then you can get Cost Accounting Degree.

  Ø  Managerial Accounting

If we want to know the problems to solve them so that we get greater profits at an effective cost then it is Managerial Accounting. For example, which economical decision is best to produce maximize revenue at minimum cost. Basically in managerial accounting, we make planning, organizing, staffing, leading and controlling the matters.

Objects of Accounting

  ü  Due to Accounting, the financial performance and financial position of the business is ascertained. Financial performance is checked from Profit & Loss account or (Called Income Statement in American Accounting System). Financial position is checked from Balance Sheet.

  ü  Accounting profits is calculated for the period.

  ü  Users of financial statements, like customers, employees, Suppliers, bankers, etc., can easily get the financial information of the business.

  ü The businessman can easily find out the operating activities of the business through financial statements.

  ü  Due to proper books of accounts, accuracy of Records, prevention and detection of errors and frauds are possible.

  ü  Cash Flows Statement is also available to accountant to better know the liquidity position of the company.

Forms of Business Organization

Note: Here Forms of business Organization mean that how many types of individual or company businesses in the business according to ownership.

There are 3 legal form of business organization:

ü  Sole Proprietorship

ü  Partnership

ü  Company

Ø Sole Proprietorship

Sole means “single” and proprietorship means “an owner”. So in sole proprietorship there is single or one owner, who owns, manages and runs the business. The single owner is enjoying all the profits and responsible for all the losses of the business. This business can be started with small amount of capital.

Examples: Shops, Bicycle and Motor repairing shops, Hair cutting &style shops, etc.

Ø Partnership

In Partnership, two or more persons(maximum number is 20) are agreed and joined to operate and manage the business. Profits and Loss are shared by the partners according to the agreement.  Some partners may provide capital and some may provide skills and some may provide both.

Ø Company

The company is an artificial person. It is created by Law. The company has its own common seal (Official stamps of the company) to transact. The person who buys the shares of the company can become the shareholder of the company. The company enjoys corporation limited liability which means that the personal property of the shareholders is not utilized for paying off the debts of the company businesses. Shareholders only liable to extent of the shares they have in the company businesses.

 There are two types of Company:

Ø Public Company

Ø Private Company

  ü   Public Company

Public Company is owned by public.

  ü   Private Company

Private Company is owned by private owners.

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