THE PURPOSE OF

ACCOUNTING
 The purpose of accounting
• What is Book Keeping?
Bookkeeping is the practice of organizing, classifying and maintaining a business’s financial records.

• What is Accounting?
Accounting is the process of recording, classifying and summarizing financial transactions.
Who Does Book keeping and
Accounting?
Book Keeper

Accountant
Benefits of bookkeeping
• Access to detailed records of all transactions

• Ability to make informed decisions

• Better tax preparation

Types of Book keeping for small
Business
• Single entry book keeping

• Double entry book keeping

Book keeping practice

• Keep your general ledger current

• Plan for taxes throughout the year

• Keep your personal and business finances separate

Should I do my own book keeping?
• Do you have the expertise?

• Do you have the time?

What is Book keeping
• Bookkeeping is the process of tracking and recording a business’s financial transactions. These business
activities are recorded based on the company’s accounting principles and supporting documentation.
• Examples of these documents include:
• Bills
• Receipts
• Invoices
• Purchase orders
Cont….
• Business transactions can be recorded by hand in a journal or an Excel spreadsheet. To make things
easier, many companies opt to use bookkeeping software to keep track of their financial history.
• Bookkeeping is just one facet of doing business and keeping accurate financial records. With well-
managed bookkeeping, your business can closely monitor its financial capabilities and journey toward
heightened profits, breakthrough growth, and deserved success.
• 1 Business Transactions
It includes all transactions that a company makes to run its operation, generate income, or make
expenses.
Example: Company ABC produces a pen by incurring a production cost of $2 and sells it at $5 to make a
profit of $3.
• #2 Non-business Transactions
Non-business interactions don’t involve making sales or purchases but charitable giving or other acts of
civic duty.
Example: Company ABC gives $1 of its profits to a charity to educate young children.
• #3 Personal
Personal trades include actions taken for purely personal reasons, such as individual purchases.
Example: The CEO of the ABC Company buys a car for their family for $10,000.
Types Based on Exchange of Money

• #1 Cash:
The most frequent type of trade is a cash payment, which individuals or companies make using cash
(paper money), cheques, or cards.
Example: Ana purchases groceries for $300 at a supermarket and pays using cash.
• #2 Non-Cash:
Any transaction that does not involve exchanging actual money comes under non-cash transactions.
Example: Ana buys a new house by borrowing $100,000 from the local bank and keeping the house as a
mortgage, making no actual cash payments.
• #3 Credit:
In the case of credit transactions, the buyer promises to pay the balance at a future date rather than
making the payment immediately after purchase.
Example: Ana purchases baking tools on credit to open a small business, promising to pay the owner
after three months.
Difference between Book Keeper and
Accountant?
• Bookkeeping is keeping proper records of the financial transactions of an entity. Accounting is recording,
measuring, grouping, summarizing, evaluating and reporting of transactions of the entity which are in
monetary terms.

• The task of Bookkeeping is performed by a bookkeeper whereas the accountant performs the task of
Accounting.

• Financial Statement forms a part of the accounting process but not the bookkeeping process.

• Accounting records are taken as a base for taking managerial decision unlike bookkeeping records, in
which decision making is difficult.
Role and Duties of Book keeper and Accountant

• Bookkeepers organize the finances by ensuring that each transaction is well-documented. They’re
involved with the business’ day-to-day operations.

• Accountants come in to provide financial analysis based on the bookkeeper’s data.

 List of Business
 Public sector organisations
 Private sector organisations
 Sole traders
 Partnerships
Limited Liabilities
• The Public Sector consists of businesses that are owned and controlled by the government of a
country

• The private sector is the part of the economy that is run by individuals and companies for profit and is
not state controlled. Therefore, it encompasses all for-profit businesses that are not owned or operated by
the government.
A Partnership consists of two or more individuals in business together. Partnerships may be as small as
mom and pop type operations, or as large as some of the big legal or accounting firms that may have
dozens of partners.
What is Profit?
• Extension activity: It is useful to refer to articles in the local press (or local knowledge) about businesses
which have recently closed. For a comparison local businesses which are expanding can be referred to.
Learners can be asked to offer suggestions on why some businesses have closed and why others are
expanding.

• Learners list why people may be interested in the information in the accounting records and the sorts of
decisions they may need to make (I). Build up a central list on the board of the types of decisions which
may need to be made.
Thank you