Accounting and bookkeeping

Accounting rests on one idea: every transaction touches at least two accounts, and the debits must equal the credits. A cash sale raises revenue and cash; a supplier bill raises an expense and a payable. Bookkeeping is the discipline of recording those pairs completely and on time. Accounting then groups them, applies judgement about timing and value, and produces the income statement, the balance sheet and the cash-flow statement. Two more habits matter from the first week. Under accrual accounting, income and costs land in the period they belong to, not on the day money changes hands, which is how a profitable firm can still run short of money. And each period is closed, so an error found later is corrected in the open instead of being quietly overwritten.

From receipt to statement

1. Capture. Invoices, receipts, payroll and bank feeds enter the system, more often through automatic imports and scanned documents than through typing.
2. Posting. Each item lands in the ledger as a balanced entry against the chart of accounts.
3. Reconciliation. The ledger is compared with bank statements and with supplier and customer balances, and every difference is chased until it is explained.
4. Period end. Accruals, prepayments, depreciation and corrections bring the books into line with what really belongs to the month or year.
5. Reporting. The trial balance becomes the three statements, prepared under a framework, and hands over to tax and audit.

The frameworks settle the harder questions: when revenue counts as earned, how a lease appears, what an asset is worth at the year end. IFRS Accounting Standards are the international set, and the IFRS Foundation keeps profiles showing how 170 jurisdictions apply them; the United States keeps its own GAAP. A bookkeeper can work for years without opening either standard. An accountant cannot.

Software, and the credentials that follow it

Most small businesses keep their books in a cloud product, and the two most familiar vendors certify people on their own systems. Larger organisations run the ledger inside an ERP such as SAP, with Excel filling the gaps between modules.

Software badges prove you can drive a tool; the professional titles prove you understand what the tool is recording. A bookkeeping job can be done well with the first. Signing off a set of accounts, advising on a framework choice or leading a finance team needs the second. The planning and costing side of the same ledger is covered in management accounting and FP&A.