Dr.

Neeraj Chitkara
 BOOK-KEEPING,
ACCOUNTING AND
ACCOUNTANCY

Dr. Neeraj Chitkara

BOOK-KEEPING
Book Keeping is an art of recording in books
of accounts the monetary aspects of
commercial or financial transactions.
Northcott
It is mainly concerned with record keeping
or maintenance of books of accounts.

Dr. Neeraj Chitkara

The maintenance of Books of accounts includes the
following activities:

Identifying the transactions of financial nature among the

various transactions.
Measuring the identified transactions in terms of Money.
Recording the identified transactions in the books of
original entries.
Classifying them into Ledger.

The book-keeping is in routine or clerical in nature and can

be performed by persons having limited knowledge of
accounting.

Dr. Neeraj Chitkara

Book-Keeping
Book-Keeping is mainly concerned with
record keeping or maintenance of books
of accounts.
Recording of transactions may be done
according of the following two system:
1. Single entry system
2. Double entry system

Dr. Neeraj Chitkara

System of Book-Keeping
Single Entry System: An incomplete
double entry system can be termed as a
single entry system. According to
Kohlar, it is a system of book-keeping
in which as a rule only records of cash
and personal accounts are maintained, it
is always incomplete double entry,
varying with circumstances.

Dr. Neeraj Chitkara

 Double Entry System: The double entry system
is the system of recording the twofold aspect of
the transaction. The system recognizes that every
transaction have a twofold effect. If someone
receives something than either some other
person must have given it, or the first mentioned
person must have lost something, or some
service etc. must have been rendered by him

Dr. Neeraj Chitkara

Double Entry System and Single Entry
System
Recording of transactions.
Maintenance of books.
Maintenance of books of account.
Preparation of trial balance.
Accuracy of profits and financial position.
Utility.

Dr. Neeraj Chitkara

ACCOUNTING
Accounting starts where Book-keeping ends.
It includes the following activities:

Summarizing the classified transactions in the form of

Profit & Loss Account and Balance Sheet etc.
Analysis and Interpreting the summarized results.
Communicating the information to the interested parties.

Dr. Neeraj Chitkara

ACCOUNTANCY
It refers to a systematic knowledge of accounting
concerned with the principles and techniques
which are applied in accounting. It tells us how to
prepare the books of accounts, how to summarize
the accounting information and how to
communicate it to interested parties.
Acc. To Kohler, accountancy refers to the
entire body of theory and practice of
accounting.

Dr. Neeraj Chitkara

Distinction between Book-keeping
and Accounting
Basis of Diff. BOOK-KEEPING ACCOUNTING
1. Scope
Book-keeping includes: Accounting in
Identifying the
addition to Book-
transactions of
financial nature. Keeping includes:
Measuring the Summarizing the
identified transaction s classified
in the term of money. transactions.
Recording the Analyzing and
measured transactions Interpreting.
Classifying them into
Communicating the
Ledger.
results.

sDr. Neeraj Chitkara

Distinction between Book-keeping
and Accounting
Basis of Diff. BOOK-KEEPING ACCOUNTING
2. Stage Book-keeping is primary It is the secondary stage.
stage. Accounting starts where Book-
keeping ends.
3. Objectives The main objective of Book-
Its main objectives is to
keeping is to maintain ascertain the net results and
systematic records of financial position of the
transactions of financial business and to communicate
nature. them to interested parties.

4. Who The Book-keeping function is

The accounting function is
performed by Junior staff. performed by senior staff.
Perform
The Book-keeper is not
The accountant is required to
required to possess analytical possess the analytical skill.
5. Analytical
Skill skill.

sDr. Neeraj Chitkara

Distinction between Accounting
and Accountancy
Basis of Diff. ACCOUNTING ACCOUNTANCY
It is concerned with recording,
1. Meaning It is a body of knowledge
classifying and summarizing of
prescribing certain rules or
transactions.
principles to be observed while
recording, classifying and
summarizing the transactions.
It is narrow in scope It is much wider in scope and
2. Scope accounting starts where Book- includes Book-keeping as well
keeping ends. as Accounting.
It depends upon Boo-Keeping It depends both on Boo-
3. Relation
Keeping and accounting.
Its main function is to ascertain It includes the decision making
4. Function the net results and the function also on the basis of
financial position of the information provided by book-
business and communicate the keeping and accounting.
result.

sDr. Neeraj Chitkara

Accounting Equation
Assets = Equities
The properties owned by business are
called assets.
The rights to the properties are called
Equities.

Dr. Neeraj Chitkara

 System of Accounting
1. Cash system of accounting : It is a system
in which accounting entries are made only
when cash is received or paid. No entry is
made when a payment or receipts is
merely due. Government system of
accounting is mostly on the cash system.

Dr. Neeraj Chitkara

 Mercantile or accrual system of accounting : It is a
system in which accounting entries are made on
the basis of amounts having become due for
payment or receipt. This system recognizes the
fact that if a transaction or an event has occurred;
its consequences cannot be avoided and
therefore, should be brought into books in order to
present a meaningful picture of profit earned or
loss suffered and also of the financial position of
the firm concerned.

Dr. Neeraj Chitkara