When you ask what is the difference between accounting and bookkeeping, most people are going to have a hard time describing the difference between the two. While there are common goals shared by accountants and bookkeepers, they provide support to a business in different stages of the financial cycle.
Bookkeepers such as those as Bould Bookkeeping focus more on the administrative and transactional aspect, where it involves the recording of the financial transactions. Account deals more with the more subjective aspect, which gives you insight on the financial information of the company based on the information from bookkeeping.
Functions of bookkeeping
Bookkeeping involves consistently recording the daily transactions and it is very important when it comes to building a successful business.
Some of the common tasks involved in bookkeeping include;
Posting credits and debits
Recording financial transactions
Maintaining and balancing general ledges subsidiaries, and historical accounts
One of the main components of bookkeeping is maintaining a general ledger. A general ledger is a basic document used to record amounts from expense and sale receipts. The process of recording such information is known as posting, and the more sales the business does, the more the ledger is posted. A general ledger comes in different forms, it can be a computer spreadsheet, a specialised software, or just a sheet of paper.
How complex a bookkeeping system is mainly dependent on the size of the business, and the number of transactions done monthly, weekly, and daily. Any sales and purchases that have been made have to be recorded in a ledger, and some items will require supporting documents. You can check the business transaction that requires supporting documents on the IRS’s website.
Functions of accounting
Accounting is a higher level compared to bookkeeping. It uses financial information from bookkeeping or from the owner to come up with financial models using the information.
Accounting consists of;
Preparing adjusting entries (this is the process of recording expenses that have been done but not yet recorded during the bookkeeping process)
Preparing financial statements of the business
Completing income tax returns
Analysing the cost of operation
Helping the owners understand the impact of financial decision
The process of accounting is going to provide reports that are going to look at different financial indicators and put them in one document. This is important because it helps the business know more about their cash flow and a better understanding of their profitability. The process is going to turn information in the ledger into statements that you use to see the bigger picture of your business, and the path the business is taking. Business owners depend on accountants when it comes to tax planning, financial forecasting, and tax filing.
The bookkeeper vs the accountant role
There are times when accountants and bookkeepers do the same work. But the main task of a bookkeeper is recording transaction and keeping financial records organised. Accountants focus more on providing consultation, analysis, and advise on matters to do with taxes.
There is no requirement of formal education for a bookkeeper. To succeed in their work, it is important for them to focus a lot on accuracy, and know about key financial topics. A bookkeeper works under an accountant or a business owner. This is why they cannot refer to themselves as “accountants”
To be an accountant, someone has to have a bachelor’s degree in accounting. If you don’t have a degree in accounting, financing degrees can become an adequate substitute.
Accountants can also acquire additional professional certification, which is not the case with bookkeepers. If an accountant has the experience and adequate education, they can get the title of CPA, which you have most likely heard of before. It is one of the most common designations. An accountant has to possess experience as an accountant and pass the Uniform Certified Public Accountant before they can become a CPA.