Sunday, May 8, 2011

What is Accounting?

Webster’s Dictionary defines Accounting as

> the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results;

The goal of this website is to take complicated statements like the above and convert to easy, understandable language.

Therefore, Easy Basic Accounting’s definition of accounting is:

A way to know how much money a company makes, and
how much it can spend before it runs out of money.

A good accounting system does both of these things.

What is Bookkeeping?

Again, to Webster:

>a person who records the accounts or transactions of a business

That’s pretty simple already, isn’t it? A person that keeps the books. Remember, to spell bookkeeping, use two ‘k’s.

The Difference Between Bookkeeping and Accounting

The simple answer, based on the above definitions, is that the Accountant designs the system, and the bookkeeper enters the transactions, and then the Accountant verifies and produces the reports, or statements based on what the bookkeeper has entered.

It can get a lot more complicated, but the goal here at EBA is to keep things understandable.

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