What’s the difference between bookkeeping and accounting?

What’s the difference between bookkeeping and accounting?

Bookkeeping deals with recording day-to-day financial transactions like invoices, purchases, sales, receipts, and payments. Accounting is an umbrella term, which can include bookkeeping tasks, and is subjective based on the business. However, accountants analyze financial data and information to provide insights on a business’s overall finances.

What does a bookkeeper do?

Bookkeepers track, record, and classify business transactions. Bookkeeping involves financial and administrative tasks that include:

• Creating invoices and receiving payments from customers
• Organizing and maintaining financial records, cash flow statements, bank documents, and loss statements
• Managing payroll
• Reconciling financial statements
• Tracking debits and credits for accounts
• Paying bills
• Monitoring key performance indicators (KPIs)
• Preparing tax returns

Bookkeepers can use one of two methods to record transactions—single-entry bookkeeping and double-entry bookkeeping. Single-entry bookkeeping keeps transactions in one row, recording expenses and income. Double-entry bookkeeping records transactions in two accounts: credit and debit. Although bookkeepers are primarily responsible for recording transactions, they may also be tasked with providing reports. Bookkeeping reports include balance sheets, income statements, and cash flow statements. These statements help analyzers evaluate the overall financial health of a company by tracking assets, liabilities, revenue, expenses, income, debt, and more.

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What does an accountant do?

An accountant performs accounting functions such as auditing, financial analyses, and financial statement analyses. Tasks include:

• Examining the accuracy of financial statements
• Ensuring financial records and statements adhere to laws, regulations, and generally accepted accounting principles (GAAP)
• Preparing entries for company accounts for weekly, quarterly, or annual closing statements
• Rectifying discrepancies and irregularities in documented transactions, records, or statements
• Providing detailed analyses for tax preparation and filing
• Recommending methods to reduce tax liabilities
• Reconciling payroll, collecting receivables, verifying contracts and orders
• Optimizing and monitoring the efficiency of accounting control procedures and software programs
• Helping apply for business loans

Although there is overlap in responsibilities with bookkeepers, accountants have different responsibilities. Bookkeepers are responsible for tracking the day-to-day transactions in a business or corporation. Accountants are responsible for providing an overview and insights on a company’s financial health and assisting the business during tax season. Accountants tend to be more qualified than bookkeepers because they’re equipped with expertise to minimize tax liability. They can minimize any tax filing errors to help reduce the likelihood of audits from the IRS. To qualify for the certification, aspiring recipients must have a bachelor’s degree, or 150 post-secondary education hours, and an additional 30 hours of graduate work. Prior to receiving certification, accountants may start off as a bookkeeper to get more experience.

Is an accountant or bookkeeper better for my business?

Accountants and bookkeepers both serve essential functions for your business. Bookkeepers handle daily transactions, recording them and ensuring invoices don’t go unchecked. During tax season, accountants are highly valuable. You can file your taxes without the fear of IRS penalization. If you are deciding between one or the other, many bookkeeping tasks can be handled by yourself or an existing employee. A highly qualified accountant is indispensable during tax season, saving you money and additional stress.

Bookkeeping and accounting can be easily confused with each other. Both roles carry out financial responsibilities. However, an accountant’s responsibilities for a business will likely outweigh a bookkeeper’s responsibilities. It’s important to equip your business with the right personnel and knowledge to ensure its longevity. To help your small business, learn more finance and budgeting tips.