What is the Difference B/W Bookkeeping and Accounting?

Bookkeeping involves recording each transaction for a business while accounting is more about looking at all those transactions to find trends that can be used to help a company. More specifically, bookkeeping is done with paper records, while accounting requires software programs.

Bookkeepers record each transaction in a company’s financial. Accounting is more subjective, giving you insights into your business’s financial health based on bookkeeping information.

Accounting and bookkeeping are two related fields with some differences in functionalities. Understanding these differences is important because the roles of accountants and bookkeepers differ based on their respective skill sets, expertise, knowledge base or background experiences (e.g., accounting vs finance). In this guide, we will explain the functional differences between accounting and bookkeeping. We will also discuss the distinct roles of a bookkeeper versus an accountant.

The function of bookkeeping

The role of a bookkeeper is to record and detail the business transactions that affect any aspect of your business (e.g., revenue, expenses, payroll, inventory). You can think of a bookkeeper as someone who records the basic transactions happening in a business — not much beyond recording them. Bookkeepers typically handle routine day-to-day ledger maintenance. The general ledger is a basic document where a bookkeeper records the amounts from sale and expense receipts. This is referred to as posting.  The general ledger is a summarised list of all amounts.

The function of accounting

Accounting is a high-level process that uses financial data compiled by a bookkeeper or business owner to produce financial models, reports, and analyses. The main goal of accounting is to provide useful information to managers, investors, tax authorities, customers, suppliers, employees etc. Accountants can also offer advice on business decisions based on analyses derived from financial data in addition to providing regulatory compliance for businesses (e.g., accounts are retained for a certain number of years). A financial statement serves as the basis for making business decisions and helps monitor performance. Accountants gather, organise, and summarise transactions, then draw conclusions based on that information. Accountants analyse past performances to make better business decisions in the future. They compare their findings with past performance and Analysing costs of operations and Completing income tax returns.

The roles: bookkeeper vs accountant

Bookkeepers record the amounts from sales and expense receipts. They keep track of financial transactions in journals, ledgers, and computer programs. Accountants combine information from several sources to draw conclusions about a company's performance. They collect relevant data that is then analysed before drawing conclusions or giving advice. Typically, bookkeepers are not required to have any formal education. To be successful in their work, bookkeepers need to be sticklers for accuracy, and knowledgeable about key financial topics. Accountants, on the other hand, need a bachelor’s degree in accounting or finance from an accredited university. Additionally, they must get a professional license from their state to operate as accountants.

Although your business may have both a bookkeeper and an accountant on staff, their job duties are quite different.

Here are the major pointers.

Bookkeeper

·        Recording and categorizing financial transactions

·        Posting debits and credits

·        Producing and sending invoices

·        Maintaining and balancing subsidiaries, general ledgers, and historical accounts

·        Completing payroll

·        Record keeping

Accountant

·        Preparing adjusting entries

·        Preparing financial statements

·        Completing income tax returns

·        Financial analysis and strategy

·        Tax strategy and tax planning

·        Financial forecasting

iKeep Bookkeeping & Hall Chadwick

Organised financial records and perfectly balanced finances produced by the bookkeeper, coupled with smart financial strategy and accurate tax filing by the accountant, contribute directly to the long-term success of every business. iKeep bookkeeping with its partner firm Hall Chadwick, offers services ranging from bookkeeping, accounting, compliance solutions, to financial planning and strategy. Find out more at www.iKeep.com.au