June 06, 2017

What’s the difference between accounting and bookkeeping?


What’s the difference between accounting and bookkeeping?

What exactly is the difference between accounting and bookkeeping? These two labels are sometimes used interchangeably, so it’s no wonder the matter can be confusing. Let’s briefly explore the two jobs to clarify their roles in business finance.

Bookkeeping, for its part, is a fairly narrow term. Bookkeepers simply keep books — that is, they record a business’s transactions. Bookkeepers maintain ledgers, post debits and credits, manage payroll and accounts payable and receivable, and handle the records of all receipts, payments, invoices, sales, and other transactions. Bookkeeping is the foundation of all accounting work.

Accounting, on the other hand, deals with the big picture of a business’ finances. Accountants prepare financial statements, analyze and interpret past performance, make future projections, create models, complete tax returns, help with compliance and audits, and give advice on financial strategy.

Basically, bookkeepers generate and organize data by recording transactions, and accountants use that data for tax purposes and high-level financial management. Your bookkeeper measures the pulse and other vital signs of your business, and your accountant uses those measurements to look at the big picture and help you make key financial decisions.

The lines do get blurred, though. Bookkeepers and accountants often have shared goals and overlapping duties. They may even perform each others’ functions, as when a bookkeeper for a company takes on some accounting tasks. For example, BooksTime often provides advanced reporting and advisory services as part of its bookkeeping service. Nowadays, bookkeepers armed with powerful modern software can perform some roles that used to be performed exclusively by accountants.

We now have a solid understanding of how these two jobs relate to each other, but what about the people that do them? The two professions have a clear delineation. Bookkeepers typically have at least an associate’s degree, are overseen by accountants or the business owner, and act as financial feet on the ground for a company’s daily operations. Accountants typically have at least a bachelor’s degree in their field, and often (but not always) an additional certification such as a Certified Public Accountant (CPA). Accountants tend to charge much higher fees than bookkeepers. A business usually needs both, and everybody wins when bookkeepers team up with accountants.

This article has contrasted bookkeepers and accountants to some extent, but in reality, the overlap between these roles is very significant. Even when the roles are totally separated, accountants and bookkeepers are still on the same team and do best when they work together to meet the shared goal of keeping your business financially healthy.

Can’t figure out whether to hire a bookkeeper, an accountant, or both? Have any other questions? Feel free to contact us at 888-90-BOOKS (888-902-6657) or contact@bookstime.com for a free consultation.

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Author: Charles Lutwidge

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