Differentiate between book-keeping, Accountancy and Auditing
The
book-keeping, accountancy and auditing are different from each other in their
meaning, scope, advantages, interest served, recording, analysis and
reliability. However, the difference between these can be expressed as follows:
Book-keeping:
May be defined as the act of recording financial transactions of an independent
unit in suitably ruled books, whether maintained manually or electronically,
kept for the purpose of each accounting cycle.
Book-keeping is
concerned with maintaining a regular, correct and automatic record of day to
day financial transactions of economic unit. It is a work of a more or less
mechanical nature and does not require knowledge of the principles of
accounting. Bookkeeping includes (i) entering the financial transaction in various
books (ii) summarizing the same in the relevant ledger accounts, (iii) casting
such accounts and striking the balance, (iv) proving the arithmetical accuracy
of ledger, and (v) providing financial data for the preparation of financial
statements.
Auditing: May be
defined as the analytical and critical examination of the books of accounts
checking and verification of evidence in support of entries appearing in the
books of accounts, and ascertaining the authenticity of the assertions made in
the financial statements. Auditing is a systematic examination of the financial
statements, to determine how far they have adhered to the management policies
and generally acceptable accounting principles.
Auditing is
quite different from book-keeping and accountancy and is not concerned with the
writing up of books of accounts or the preparation of financial statements.
Concisely:
Bookkeeping, as the name implies, is the writing up and keeping of books of
accounts (both subsidiary and main).
Accountancy,
refers to the preparation of periodical financial statements for presentation
to owners and others. Auditing, is the examination, verification, valuation and
giving professional opinion on the books, records and financial statements
prepared by the enterprise.
Concluding:
(a) Bookkeeping
begins simultaneously with the introduction of capital, whether in cash or in
kind of partly in each form and comes to an end with the return of capital of
the owner;
(b) Accountancy
begins where bookkeeping ends.
(c) Auditing has
nothing to do with bookkeeping and accountancy but is a critical and
investigative examination of financial data collected, classified and
summarized according to proper and generally accepted principles.
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