What Is Bookkeeping? Scope And Objectives Of Bookkeeping

What Is Bookkeeping? Scope And Objectives Of Bookkeeping

Accounting and bookkeeping are often used interchangeably, sometimes by novice accountants or professionals from other fields. However, bookkeeping is just one part of the accounting process which involves the recording of financial transactions on a daily. So in this article, we are going to learn about the meaning and scope of book-keeping and how it differs from accounting.


We can't learn about bookkeeping without first understanding its meaning. Bookkeeping in accounting is defined as the activities which deals with the systematic recording and classification of financial data of an organization in an orderly or arranged way. Bookkeeping is a record-keeping function done to help in the accounting process. It is one of the key components in preparing the financial statements of the organization which is usually done at the end of the financial year.

Bookkeeping also does the functions of classification of financial transactions and events. Such classification of transactions is very important to help keep up proper financial records. It also concerns with preparing source documents for the financial transactions and other business operations being carried out within the organization.

There are many methods of book-keeping. The most common ones are the double-entry system (for every credit entry, there is a corresponding debit entry and vice-versa) and the single-entry system. Apart from the methods stated above, there is a commonly used method which involves the process of recording financial transactions in any manner. They are also acceptable book-keeping processes.

ALSO READ: The Old And New Name Of Accounting Terms


  1. The main objective of bookkeeping is to keep a complete and accurate record of all the financial transactions in a systematic orderly manner. This ensures that the financial effects of these transactions reflect in the books of accounts.
  2. Then the next main objective is to find out the overall effect of all recorded transactions on the final statement of the company. 
  3. Bookkeeping is used to ascertain the final accounts of the company, namely the Profit and Loss Account (income statement) and the Balance Sheet.

ALSO READ: Various Steps Of Accounting Cycle


One of the main importance of bookkeeping is to maintain proper records and show the financial position of each head/account of income and expenditure. Detailed information about each income or expense of an organization could be obtained instantaneously through bookkeeping

ALSO READ: Meaning And Uses Of Principal Journal

We are going to illustrate with an example. Lets say a company makes sales in both cash and credit transactions. All sales transactions both cash and credit will be recorded. When a credit sale is made, the creditor’s account will be recorded. So at anytime, the management can decide which creditors owe them by just looking at the records/accounts, they will also know the amount of money.

Also, maintenance of accounts and financial statements is a legal requirement for business in most cases. In the case of companies, banks or insurance companies, there are acts that require such firms to keep and keep up proper financial records. Book-keeping becomes mandatory in such case.

ALSO READ: Difference Between an Accountant And a CFO

What Activities Are Involved In Bookkeeping?

There are so many activities of bookkeeping. Book-keeping comprises of a lot of functions and activities put together. Some such activities are
  1. Recording all financial transactions
  2. Posting debits and credits in the respective ledgers
  3. Producing and orderly arrangement of all source documents such as invoices
  4. Payroll accounting and upkeep may also be clubbed in with book-keeping

What Is The Difference Between Accounting And Bookkeeping?

Here, we are going to learn about the differences between accounting and bookkeeping. Without knowing the differences, one may think that accounting and bookkeeping are the same.
  1. Book-keeping consists of recording financial transactions in a logical manner while accounting deals with summarizing, interpreting, communicating of such recorded financial transactions for decision-making.
  2. Bookkeeping is the basis of the process of accounting while accounting is the basis for the Language of business.
  3. Financial statements cannot be prepared from bookkeeping while preparing financial statements is the major aim of accounting. 
  4. Manager do not make decision with bookkeeping records while Accounting records help managers in business decision-making.
  5. There are no branches of Bookkeeping while accounting has branches such as Cost Accounting, public sector accounting, taxation, Management Accounting, etc. 
  6. Bookkeeping is done by bookkeepers, who do not need any special skill or knowledge while accountants are saddled with performing accounting functions. Accountants require special accounting knowledge and skills.

Post a Comment