What’s the Difference Between Bookkeeping and an Accounting?

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An article by contributor Hannah Thomas.

If someone asked you to explain the difference between bookkeeping and accounting, could you do it? Most people wouldn’t because the differences are subtle enough for anyone outside the industry to really know about them. Both bookkeepers and accountants are extremely important for the financial activity, which has put both of these jobs in high demand across the world.

Both the bookkeeping and accounting have common goals when it comes to supporting the business, but they do it in different stages of business’ financial cycle. This guide will highlight some of the differences, as well as similarities, between the two professions – to make it easier for you to understand.

Bookkeeping

The definition of bookkeeping is that it’s a process of recording company’s financial transactions (payments, purchases, sales, etc), while basically being the first step of the accounting process. The fact the accounting process can’t take place without accurate and organized bookkeeping. Here are some of the main responsibilities of bookkeeping:

  • Recording of company’s daily transactions
  • Producing invoices
  • Posting company’s debits and credits
  • Preparing financial statements for the accounting process
  • Maintaining a general ledger

The most important duty of any bookkeeper is to maintain the general ledger, a document in which they record any day-to-day transactions of a company. The more sales there are, the bigger the ledger will get. While ledgers used to be sheets of paper in the past, they are now more often than not digitalized through specialized bookkeeping software.

Being a bookkeeper thus usually means going through a bookkeeping course, since accuracy and attention to detail are the most valued attributes of any bookkeeper. Most companies out there will require at least 2 years of experience in the field or a degree that matches it. Bookkeepers are usually under direct supervision of a business accountant, or, if it’s a small business, a business owner.

Accounting

The process of accounting is effectively the analysis of financial transactions in financial statements (prepared by the bookkeepers) through a set of accounting principles, requirements and standards. The main idea is for a company to make informed business decisions based on the financial condition that is reported through accounting process. Accountant’s area of expertise is much wider than the one of bookkeeper’s, so while they’re completely fit to do everything a bookkeeper does, they mostly focus on advisory and analytic aspects of a financial cycle.

Accounting thus means the next responsibilities:

  • Completing tax returns
  • Account Auditing
  • Advising on financial management
  • Creating budgets
  • Analyzing operational costs of a business
  • Advising the business owner on the financial impact of business decisions

So it’s safe to say that the main goal of accounting is to analyze and offer a better understanding of a company’s profitability and increase the awareness of its cash flow. Accountants use the information provided by bookkeepers through general ledgers to do these tasks effectively.

An accountant is a crucial role in today’s business because it’s impossible to make an informed business decision without them, which is why experts like Darcy Bookkeeping & Business Services are seeing rapid growth in the demands for their services.

Differences between Accounting and Bookkeeping

While bookkeepers are in charge of keeping records clean, they have no advisory role and no decisions can be made based on their records. Accountants, on the other hand, can analyze the data provided by the bookkeepers and create records that can be used for making informed decisions.

To become a bookkeeper, you can take a couple of accounting courses in order to develop some basic understanding of the accounting process. Accountants, on the other hand, must have at least a bachelor’s degree, especially if they’re looking to become a certified public accountant.

Which One Should You Choose?

Depending on your capabilities, education, and ambition – you can go with either one of these professions. Bookkeeping is better for starters in this field, since it will let you learn about accounting process while working. On the other hand, being an accountant is a step above bookkeeping, so it usually requires experience in the field, as well as better education.

That said, both of these jobs are extremely important for the financial health of a company, and whichever you choose you can rest assured that you’ll have an important role when it comes to that company’s future.

Hannah Thomas is an expert in business innovation and management with a love for writing. She is always eager to learn new things and to share the knowledge she acquired along the way. You can find her (and follow her) on Twitter.


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