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Similarities & Differences Between Accounting & Bookkeeping

Whenever a business is formed or exists, it requires certain business operations to be carried to successfully run the business. Some functions in the business are usually made mandatory by the law of the lands where business is based or its activities are carried out.

There are certain financial management operations considered essential to be carried out by any business regardless of being directly or indirectly made mandatory by the law. The reason to adopt such financial operations is to provide a clear understanding of how successful the business is like What are the earnings and the losses? Accounting firms in Dubai are playing the vital role in the economy of UAE to assist the new investors and the business owners to maintain their financial statements and manage finances by providing bookkeeping services in Dubai and accounting services.

You should know: How to Find Best Accounting Firms for Tax Accounting?

Why businesses need Accounting & Bookkeeping?

Every business is always laid on some sort of financial model. Be it products or services, someone is either buying or selling all the time when involved in the business. This involves transactions to be recorded, so that whenever or for whatever the need arises. the record should be available. Without accounting and bookkeeping, no business can be properly evaluated. Similarly, without these services proceeding towards other important and legally required services is not possible. Therefore, the businessmen in the UAE must understand the importance of accounting and bookkeeping services for their businesses.

What Do Accounting and Bookkeeping Mean?

Both of these services are common words in the business world. Let us try to understand the terms through their simplest and common definitions.

Accounting

The simplest term to define Accounting is the process of recording and analyzing financial data.

Are We Already Familiar with Accounting?

In our lives, we experience accounting activities. A mother usually prepares the budget for running the house and family. The budget is prepared on the basis of past expenses. All expenses like grocery bills, utility bills, children schooling fee, bank, and other payments etc. are recorded through the month. Some other petty expenses are made and recorded. Savings are planned and new investments are made on its basis. All the data either recorded at her fingertips or in a book lead to define how efficiently the budget was spent the whole month and provides guidelines to create next month’s budget.

Accounting Forms A Financial Backbone of a Business

The accounting forms basis for all financial information of a business or an organization. This information is valuable as it will help understand the financial position of the business. This will also provide meaningful reports that will help other financial tasks get easier.

Why Is Accounting So Important?

Accounting is such an important function in an organization that many businesses will even happily acquire the expertise of accounting solutions company to make sure their accounts are well maintained.

A well-done accounting process will provide assistance for:

  • Availability of Financial records that may be required anytime for internal and external reviews.
  • Legal assistance as proof of financial recordings and statements will be available if there is a conflict.
  • Performance analysis of how well the business is doing and to identify the areas of over expenditures.
  • Planning and Control of all financial matters based on available budgets prepared in the light of accounting statements.
  • Decision making gets easier for the Managers to drive new policies, budget allocations for new business needs, control the loses and pricing etc.

Find out more: Top 7 Advantages of Outsourcing Your Bookkeeping

Bookkeeping

The process of recording financial data is often referred to as Bookkeeping. The bookkeeping expert sometimes not only records the financial transactions but also summarize it for creating reports.

Why Is Bookkeeping Important?

For every financial information in a report, there must be evidence in the forms of details and references for each transaction recorded to form the state. Accounting bookkeeping services are responsible to record every single transaction with all its references in the form of receipts, bills, invoices etc. The data from all such transcripts are recorded to generate and summarize reports. Without the availability of detailed data, anyone can challenge the authenticity of the financial statement.

Are Accounting and Bookkeeping the Same?

A lot of people think of accounting and bookkeeping as the same. The reason is that most of the times both the terms are referred together as a process of forming a financial statement.  This is actually true to an extent, as both the accounting and bookkeeping involves the recording of financial data as well as summarizing the financial reports or statements.

Then What’s the Difference?

No need to put yourself into any confusions. As we said earlier that there are similarities between accounting and bookkeeping but they are totally not the same. For experts in the field, though both the processes are carried out together, yet they know and understand the difference.

Though both the functions require recording of data to form meaningful reports or financial statements bookkeeping is only limited to this. Whereas, accounting involves a lot ahead when it comes to the Analysis of the financial statements and reports to form the budgeting, basis for decision making and utilizing the data formed through bookkeeping process to understand the financial position of the business.

Bookkeeping Is a Component of Accounting

Yes, this is very true. Bookkeeping and accounting are not completely the same and actually bookkeeping is a component of an accounting process. The accounting process has two components

  • The Bookkeeping and
  • The Analysis

A bookkeeper will only be recording the transactions against any account and the reports associated with it. Whereas, an accountant will utilize those reports and financial statements to fix the records and identify any discrepancies through the reconciliation process.

Find more: Reasons for Outsourcing accounting and bookkeeping services in Dubai

Who Can Manage Accounting and Bookkeeping?

An accountant just entering the career is always introduced to the bookkeeping process only and it’s only through years of learning and experience that someone will be able to become a full-fledged accounting expert. From the academic approach, many people agree that a bookkeeping process can be carried out by someone with an intermediate level of education and good mathematical skills. But to become an accountant one must have a degree in accounting with skills in mathematics, statistics, analysis and good understanding business details.

Therefore, businesses must make sure that only experts should carry out their accounting and bookkeeping tasks to avoid inaccurate and poor results. The businessmen in Dubai need to hire the professional services of accounting firms in Dubai so that they can have accurate information to make decisions.

Accounting services for small business in Dubai

A lot of businesses, especially business units of foreign investors in the UAE, new businesses and small companies, usually prefer to outsource accounting and bookkeeping services to the accounting firms in Dubai. This benefits business as the companies does not have to incur the cost of hiring in-house accounting experts and yet enjoy services of well-experienced accounting solutions providers like Farahat and Co. within reasonable rates. Farahat and Co. with its more than 3 decades of experience in providing financial solutions can be trusted to carry out services like accounting, bookkeeping and related for your business in a very professional way.