Similarities & Differences Between Books of Accounts And Financial Statements

Books of Accounts are the first phase of Accounting called Bookkeeping while Financial Statements are the second phase of accounting.

In the books of accounts, two main types e.g., Primary and Secondary books of accounts i.e., Journals And Ledgers are prepared while 5 types of Financial Statements i.e., Income Statement, Statement of Financial Position (Balance Sheet), Statement of Cash Flows, Statement of Retained Earnings and Statement of Changes in Equity are prepared.

Books of accounts are internal records of the company’s business which are disclosed to internal management and not disclosed to public unless it is required by law to do so while financial statements are disclosed to the Users of Financial Statements / Information.

Similarities Between Books of Accounts And Financial Statements

Both are helpful for the proper maintenance of accounting data and information of a company’s business.

Both complements to each other. For instance, if we ignore proper books of accounts, then we can not prepare financial statements accurately and reliably. Similarly, if we do prepare only books of accounts and not prepare financial statements, then we can not provide useful information to the users of the financial statements and also unable to interpret the results created from these financial statements such as Current Ratio, Gross Profit Ratio, etc.