1.1 The Purpose of Accounting

2026 Syllabus Objectives

By the end of this subtopic, you should be able to:

  1. Understand and explain the difference between book-keeping and accounting.
  2. State the purposes of measuring business profit and loss.
  3. Explain the role of accounting in providing information for monitoring progress and decision-making.

Main Content

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1. Book-Keeping vs. Accounting

What is Book-Keeping?

Book-keeping is the process of carefully recording every single financial transaction a business makes, day by day. Think of it like keeping a very detailed diary — but instead of personal events, you are writing down every time money comes in or goes out of the business.

  • Every business, no matter how tiny, must record every financial transaction.
  • If records are not kept, important information can be forgotten or missed, which can cause serious problems for the business.
  • The person who does this job is called a book-keeper.
  • Book-keepers use a system called double entry book-keeping to record transactions. This system ensures that every transaction is recorded in at least two places, keeping records accurate and balanced.
  • Book-keepers work with business documents every single day — things like receipts, invoices (bills), cheques, and bank statements.

What is Accounting?

Accounting is the next step after book-keeping. It takes the detailed records the book-keeper has created and uses them to:

  • Prepare financial statements (formal reports about the business's money situation).
  • Provide useful information to the owner and managers so they can understand how the business is doing.
  • Help with decision-making — deciding what to do next to improve the business.

The person who does accounting is called an accountant. Accountants are mainly responsible for managing, updating, and reporting the business's accounts.

The Key Difference

Book-KeepingAccounting
What it doesRecords day-to-day financial transactionsUses those records to prepare reports and support decisions
When it happensEvery single dayPeriodically (e.g. once a year)
Who does itBook-keeperAccountant
Main outputDetailed transaction recordsFinancial statements

Simple way to remember it: Book-keeping is collecting and recording the raw financial data. Accounting is using that data to understand the business and plan for the future.

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