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For a business entity to succeed, recording of transactions must be proper and complete in all aspects. Most people use the terms bookkeeping and accounting interchangeably when referring to the process of recording and analyzing data. Though the two terms are closely related, there are specific distinguishing features.

1. Definition

Most entities are involved in diverse day-to-day transactions in the course of their operations. The entity records these transactions chronologically in the proper daybooks. This is referred to as bookkeeping and it entails recording of the amounts, dates and sources of each revenue and expense transaction. The bookkeeper is responsible for ensuring all transactions are recorded in the correct daybook, supplier's ledger, customer ledger and general ledger.

On the other hand, financial accounting is a system that analyzes information obtained from bookkeeping process to generate financial statements required by various parties, including, management, investors and owners of the business.

2. Scope

Bookkeeping involves collecting, recording and classifying the transactions in a logical form. The bookkeepers record the transactions and then post the totals to the trial balance. The bookkeeping process ends at the trial balance level. A trial balance is prepared to determine the mathematical accuracy of the transactions and thus check for clerical and arithmetical errors.

On the contrary, financial accounting starts where bookkeeping ends. Financial accounting checks for the errors in the trial balance and adjusts them accordingly. Before preparing the financial statements, the accountants verify whether the records are accurate to ensure that they show a true and fair view of the business. The financial accounting process ends when results are communicated to interested parties.

3. Objective

Bookkeeping aims at ensuring that all transactions are recorded completely, accurately and in an orderly manner. The bookkeepers ensure that the proper records of business transactions are available for future reference.

Conversely, financial accounting aims at analyzing the transactions and communicating information to interested parties to enable them make informed decisions. The accountants prepare two key financial statements; the balance sheet, which reports the financial status, and the income statement, which reports profitability of the firm.

4. Users

Information obtained from the bookkeeping process is available internally for use by the accountants for further analysis and processing.

The information contained in statements prepared by accountants is beneficial to both internal and external parties. Internal parties include the managers, who use the information for planning, forecasting