This document provides an overview of bookkeeping and accounting. It defines bookkeeping as the art of recording business transactions and accounting as the process of identifying, measuring, recording, and communicating economic information. The key differences between bookkeeping and accounting are that bookkeeping has a limited scope and is clerical work, while accounting has a wider analytical scope. Accounting provides information to various users and has branches like financial, cost, management, and forensic accounting. It also discusses the accounting cycle, objectives, bases, advantages, and limitations of accounting.

1. By
Mr. Srinivas Methuku

2. Objectives of the chapter:
After completion of this chapter student should be
conversant with:
 Meaning and definition of book-keeping
 Features of book-keeping
 Meaning and definition of accounting
 Features and advantages of accounting
 Difference b/w book-keeping and accounting
 Basis of accounting and branches of accounting
 Limitations of accounting

3. Introduction:
 Introduction
 Need for accounting
 Chitragupta
 Kautilya’s Arthashashtra
 Luca De Bergo Pacilio from Italy developed double
entry system in the year 1494.

4. Meaning and definition of book-
keeping
 Definition:
“The art keeping permanent record of business
transactions is book keeping.”
 J. R. Batliboi: “book-keeping is an art of recording
business dealings in a set of books”.
 R. N. Carter: “Book-keeping is the science and art of
correctly recording in the books of accounts, all those
business transactions that results in transfer of
money’s worth”.

5. Features of book-keeping
 It is the process of recording business transactions.
 Monetary transactions are only recorded.
 Recording is made in given set of books of accounts.
 Record is prepared for a specific period but presented
for future references.
 It is an art of recording business transactions
scientifically.

6. Meaning and definition of
accounting:
 Accounting definitions:
 As per AICPA Financial accounting is “the art of
recording classifying and summarizing in a significant
manner in terms of money transactions and events
which are in part, at least of a financial character and
interpreting the results thereof”.

7. Meaning and definition of
accounting:
 As per AAA accounting is “the process of identifying,
measuring, and communicating economic information
to permit informed judgments and decisions by users
of the information”.

8. Relevant aspects of the definition
of accounting
 Economic events
 Identification
 Measurement
 Recording
 Communication
 Organisation
 Interested users of information

9. Features of accounting:
 Identifying the transactions and events
 It is the art of recording business transactions
 It is the art of classifying business transactions
 The transactions are events of a business must be
recoded in monetary terms
 It is the art of summarizing financial transactions
 It is an art of analysis and interpretation of these
transactions
 The result of such analysis must be communicated to
the persons who are to make decisions

10. Difference b/w book-keeping and accounting:
Point of
distinction
Book-keeping Accounting
1. Objective The object of book-keeping is to
prepare original books of accounts,
trial balance and to maintain
systematic record of financial results.
The object of accounting is to record,
classify, summarize, analyze, and interpret
the business transactions and ascertain
financial results and to communicate to
various parties.
2. Scope It has a limited scope It has a wider scope
3. Level of work It is restricted to clerical work It is concerned with all levels of Mgnt.
4. Mutual
dependence
It has to depend on accounting
principles
It has to depend on book-keeping
5. Results of the
business
It shows the net result and financial
position.
It analyses the operating and financial
position of the business
6. Stages Book-keeping is a primary stage Accounting is secondary stage
7. Nature of job The job of book keeper is routine The job of accountant is analytical in nature
8. Knowledge
required
Book keeper not required to have
higher level of knowledge
The accountant must have higher level of
knowledge
9. Staff for
performing
Book keeping work performed by
junior staff
Accounting work is performed by senior
staff

11. Accounting cycle:
Identification
of
transactions
Recording of
transactions
in journal
Posting into
ledger
Preparation
of trail
balance
Passing of
adjustment
entries
Preparation
of final
accounts

12. Objectives of accounting:
Permanent Record
Measurement of Outcome
Creditworthiness
Efficient Use of Resources
Projections

13. Users of accounting:
Shareholders
Investors
Creditors
Workers/Employees
Government
Researchers

14. Branches of accounting:
Financial accounting
Cost accounting
Management accounting
Human resource accounting
Responsibility accounting
Inflation accounting
Forensic accounting

15. Basis of accounting:
 Cash basis
 Accrual basis
 Mixed

16. Advantages of accounting:
Replacement of memory
Evidence court
Settlement of taxation liability
Comparative study
Sale of business
Assistance to the insolvent person
Assistance to various parties
Facilities in raising loans
Assistance to the government
Facilitate control over assets

17. Limitations of Accounting:
 Records only monetary transactions
 Effects of price level changes not consider
 No realistic information
 Personal bias of the accountant affects the accounting
statements
 Permits alternative treatments
 Profit no real test of managerial performance
 Historical in nature
 Window dressing in balance sheet

18. Thank you for listening !!!