Difference between Bookkeeping and Accounting

If you’ve been doing your own bookkeeping but now find that you don’t have the time or skillset to record daily transactions and keep meticulous financial records, it’s time to hire a bookkeeper. The main goal of an accountant is to determine the financial status or well-being of the company and pass this information on to the key stakeholders. Unlike bookkeepers, accountants are qualified to audit and certify financial statements as accurate. An accountant typically oversees and reviews a bookkeeper’s work while evaluating all aspects of a business’s finances. More broadly, an accountant may do bookkeeping, but a bookkeeper doesn’t do accounting. The roles of bookkeepers and accountants complement each other, and often overlap.

The accounting process involves recording, interpreting, classifying, analyzing, reporting and summarizing financial data. Recording financial transactions is the first part of and the foundation of the accounting process. Examining the ledger and supporting documents to prepare taxes and financial statements is an accounting task. Keeping an accurate ledger is critical to avoiding debts and late fees, filing taxes correctly, maintaining healthy business finances, and even keeping customer satisfaction high.

Which Accounting Jobs Are in Demand?

Bookkeeping and accounting may appear to be the same profession to an untrained eye. This is because both accounting and bookkeeping deal with financial data, require basic accounting https://kelleysbookkeeping.com/difference-between-bookkeeping-and-accounting/ knowledge, and classify and generate reports using the financial transactions. At the same time, both these processes are inherently different and have their own sets of advantages.

Further, he prepares them in a way that ensures systematic recording and classification of business transactions. If you are interested in becoming an accountant, it may be beneficial to your career to become a certified public accountant (CPA), which has its own exam. You must have a minimum of 150 postsecondary education hours, or what amounts to a bachelor’s degree in accounting, and an additional 30 hours of graduate work. Many business owners decide to hire bookkeeping or accounting help when their business finances have become more complicated to manage alone.

Merging of Bookkeeping and Accounting Functions

An accountant, on the other hand, is needed when a business becomes more complex as it grows, especially if it goes public and has outside shareholders. Accountants can also help companies navigate regulations and compliance requirements, such as varying state sales-tax collection rules for online businesses. The records reported by the bookkeeper will determine the accountant’s advice to leadership, and ultimately, the health of the business overall. A bookkeeper is skilled at keeping documents and tracks a wide net of financial information. Even though it will cost you to hire someone else to manage your books or file your taxes, you may also discover more savings by using a professional. A trained accountant can help you take advantage of deductions you didn’t know about.

• While bookkeeping and accounting are very similar in their functions, there are significant differences between these two roles.
• Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos.
• Accounting analyzes bookkeeping data to create models, make forecasts, and aid business decisions about the future direction of the company.
• A bookkeeper must catch tiny or hidden mistakes because even small ones can affect your business.
• Each sale and purchase your business conducts must be recorded in the ledger and some items will need documentation.
• In fact, our bookkeeping agent on staff majored in business with a concentration in accounting.
• Bookkeeping (also called recordkeeping) can be thought of as the financial information infrastructure of an entity.

You can do your bookkeeping in Excel, use business bookkeeping software, and/or employ a bookkeeping service. Accountants tend to have specialized knowledge that helps Small Business Accounting 101: 12 Steps for Basics and Setup 2023 them look at the ‘big picture’ of your business finances and make recommendations. Bookkeeping and accounting are both important parts of managing your finances.