Question

Sectors will at some time interact with other sectors as part of their financial dealings. Two sectors which will interact with each other are Accounting-Bookkeeping.Describe the interaction which takes place between them. List at least two benefits that interaction between these parties can have for financial services and/or their customers.

Answer 1

Accounting and book keeping both work with financial data.

Book-Keeping:

Book-Keeping is a primary and basic function in the process of accounting and concerned with recording and maintenance of books of accounts only. In this process, following basic activities are considered essential:

(i) Identification of the transaction from various business transactions, which have financial character;

(ii) Measurement of those transactions in terms of money;

(iii) Recording those transactions in the books of original entry;

(iv) Classification of the transactions keeping in view the respective ledger account.

We need a bookeeper who can help in gathering and recording financial information.

Accounting:

Accounting is the secondary function and it starts where function of book-keeping ends. In this process, following basic activities are considered essential:

(i) Summarisation of classified transactions in the shape of final accounts;

(ii) Analysis and interpretation of the results disclosed by final accounts and drawing meaningful conclusions;

(iii) Communicating the required information to all the concerned parties.

We need an accountant to can make sense of your financial information.

Together book-keeping and accounting can help in better understanding of business through financial sickness and health.

Benefits from interaction of Accounting and Book-keeping for financial services and/or their customers:

1. Financial Comparison:

A comprehensive accounting and book-keeping system allows an entity to analyse its revenues and expenditure at a time. The data can be grouped by the week, month, quarter or year to be analysed and compared to past years. By this, a company can improve its profitability.

2. Budget Monitering:

Business entities require an accurate report of current spending and revenue to help compare actual results with projections in the annual budget. An accounting system facilitates up-to-date financial information of the company so that it can be cross-checked with the budget to make sure that the company is not overspending.