Accounting and Accountancy are often considered as one and the same; however, these are two different concepts.
Accounting
Accounting can be defined as the process in which all the daily transactions of a company or the financial institution are recorded and with the help of those records, the preparation of the financial statement is done so that those statements can be presented in the simplest and the easiest possible manner.
Accounting consists of some basic terms:
- Summarizing the data: All the financial transactions are recorded and summarized at one place.
- Analysing the data: After summarizing the data the different specialists analyse the data.
- Interpreting the data: In this step all the information collected from the previous steps is forwarded.
- Communicating the information: After successful completion of the above steps the information required by the different investors and other business entities is communicated to them.
Accountancy
Accountancy is the systematic body of knowledge that explains why and how a firm prepares its financial accounts. It lays down the principles and rules for identifying, recording, classifying, summarizing, and communicating financial information to interested parties. It focuses on collecting relevant financial data and using it meaningfully for decision-making.
Accountancy is wider in scope than accounting, as it provides the theoretical framework on which accounting and bookkeeping are based. It includes established principles, concepts, and standards that guide the proper recording and presentation of financial and non-financial transactions. By providing this framework, accountancy helps accountants prepare accurate financial records and enables stakeholders such as shareholders, managers, and directors to understand the financial position and economic resources of the organization in monetary terms.
Accounting vs Accountancy
Basis | Accounting | Accountancy |
|---|---|---|
Meaning | Process of recording, classification, summarizing, presenting, and interpreting the financial information. | A body of knowledge that helps in measuring, processing, and recording the non-financial and financial statements. |
Scope | Narrower in scope. | Wider in scope. |
Dependability | Depends only on the bookkeeping. | Depends on both the accounting and the bookkeeping. |
Explains | Nature of work performed. | Opted as a profession. |
Concerned With | It only contains the practical part. | It contains both the theoretical as well as practical parts. |
Based on | Totally based on the knowledge of the accountancy. | Field of knowledge that is considered to be the route to accounting. |
Focus | Focuses on how financial transactions are recorded | Focuses on why and under what principles transactions are recorded. |
Use | used to understand the net income and financial position of a business and to present them to concerned parties. | Decision-making based on the knowledge got from the accounting. |
Tool | Financial statements are the major tools of accounting. | Techniques and principles are significant tools of accountancy. |