Bookkeeping, often called record keeping, is the part of accounting that records transactions and business events in the form of journal entries in the accounting system. In other words, bookkeeping is the means by which data is entered into an accounting system. This can either be done manually on a physical ledger pad or electronically in an accounting program like Quickbooks.
Since the principles of accounting rely on accurate and thorough records, bookkeeping is the foundation accounting. Bookkeepers often times has to exercise analytical skills and judgment calls when recording business events since source for most accounting information in the system.
A good example of business event that requires analytical skills is trade in of a vehicle. The bookkeeper must review the transaction and determine how much the old vehicle trade in value was and the price paid for the new vehicle. He or she must also find out whether any loans were required for the new purchase and how much cash was paid for the transfer.
As you can see, bookkeepers generally must have a good understanding of accounting principles and GAAP in general. Once the business event has been evaluated, the bookkeeper makes a journal entry in the general ledger to remove the old vehicle and associated accumulated depreciation and record the purchase of the new vehicle with any applicable gains or losses on the transition.
The entire process of analyzing an event and recording the transaction in the accounting system is a good example of bookkeeping. Many times accounting and bookkeeping are used interchangeably, but this is incorrect. Accounting has a much more broad definition than simply recording transactions in an accounting system. Accounting is used to identify events that need to be recorded, recording the transactions of these events, and communicating the effects of these transactions with people inside and outside of the company. As you can see, bookkeeping is only a small part of the broader definition of accounting.
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