Every business needs bookkeeping and accounting to remain successful, and while these two terms are often lumped together they are not the same thing.
In simplest terms, bookkeeping includes the actual recording of all financial transactions. Accounting is the process of interpreting, analyzing, classifying, reporting and summarizing the financial data.
Bookkeeping is a generalized set of repetitive tasks, while accounting is more complex in its jobs and responsibilities. As a result, accountants require a higher level of education and experience to get the job done right.
What Does A Bookkeeper Do?
The average bookkeeper is in charge of recording basic accounting transactions including:
- Invoices from suppliers
- Cash receipts from customers
- Making sure suppliers are paid in a timely fashion
- Processing payroll
- Changes in inventory
- Petty cash transactions
- Any issues that arise with customer invoices
All of these procedures are mechanical in nature and even if the numbers change, the process follows the same routine month after month. While this data is used to generate financial statements, these statements alone are not considered complete. That’s because information generated by an accountant is necessary for a complete look at your overall financial picture.
What Does An Accountant Do?
Accountants add to the information recorded by a bookkeeper, giving the adequate information necessary for a quality financial statement. An accountant adds the accruing or deferring expenses as well as the accruing or deferring revenue.
Additional tasks handled by an accountant include:
- Creating a general ledger
- Making the chart of accounts
- Creating customized management reports that address any issues
- Designing financial statements
- Making a budget to compare with results
- Completing a set of controls to operate the financial system within
- Using financial information to create tax returns
- Making adjustments to the classification or recordation of transactions in order to meet accounting standards
- Creating a system that records, archives and destroys unnecessary documentation
Medium to large-sized businesses generally have an accountant on board that is in charge of these procedures. These same businesses often have multiple bookkeepers in charge of recording the mass amounts of data that come in and out of the company each day.
Can Someone Be Both A Bookkeeper & An Accountant?
People often confuse the two professions because there is a lot of overlap. Both deal with finances and require understanding of financial data. Some people are trained to handle both bookkeeping and accounting, but not everyone is.
A bookkeeper can successfully tackle their line of work by taking a few accounting courses and grasping a basic understanding of accounting. On the other hand, in order to perform high quality and beneficial accounting services one needs more specialized training. That’s because accounting requires a higher level of expertise in order to handle every aspect from recording data to analyzing it and understanding what it all means. Bookkeeping simply requires someone that knows how to properly record data.
While an accountant is qualified to also play bookkeeper, their time may be better-spent analyzing data as opposed to making note of it.
Does Your Business Need An Accountant?
A few clear signs your business could benefit from the addition of an accountant include:
1. You or the person hired to do bookkeeping is not experienced or familiar with accounting processes.
2. No one at your company specializes in U.S. Tax Code.
3. Accounting tasks are taking you or other employees away from other tasks that directly impact your ability to grow. An accountant not only shows you how to incur growth, but they free up time to pursue endeavors that lead to growth.
4. Your company is rapidly expanding and therefore producing more paperwork and overall number crunching.
5. You notice an increase in revenue but are not seeing an increase in profits. This is not an uncommon problem, but one that should be addressed by an accountant as soon as possible.
6. You have investors that want to see professional financial reports.
7. You plan to expand your business into other states.
If your business has a bookkeeper that you rely on to generate financial reports you could benefit greatly from having a certified accountant take a look at all of the data. There are so many things the trained eye can identify to drastically improve your overall financial picture. Instead of hiring a full-time accountant, you can save money by outsourcing accounting services to DGK Group.
FAQs
Bookkeepers and accountants sometimes do the same work, but have a different skill set. In general, a bookkeeper's role is to record transactions and keep you financially organized, while accountants provide consultation, analysis, and are more qualified to advise on tax matters.
What is the difference between a bookkeeper and an accountant? ›
“Accounting is designed to turn data into information.” Bookkeepers handle the day-to-day tasks of recording financial transactions while accountants provide insight and analysis of that data and generate accounting reports.
What are the differences between bookkeeping and accounting? ›
In the simplest of terms, bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data. Bookkeeping and accounting may appear to be the same profession to an untrained eye.
What is one difference between a bookkeeper and an accountant quizlet? ›
What is the difference between accounting and bookkeeping? Accounting is a system for measuring, processing and communicating financial information. Bookkeeping is a procedural element of accounting.
What is the difference between a bookkeeper and an associate accountant? ›
Here's an easy way to think about it—bookkeepers lay the groundwork by recording financial transactions so that accountants can analyze financial statements and provide strategic recommendations.
What is the difference between bookkeeping and accounting 5 points? ›
However, these concepts are different. While bookkeeping is all about recording of financial transactions, accounting deals with the interpretation, analysis, classification, reporting and summarization of the financial data of a business.
What does an accountant do that a bookkeeper doesn't? ›
Bookkeepers and accountants share the same long-term goal of helping your business financially thrive, but their roles are distinct. Bookkeepers focus more on daily responsibilities, like recording transactions, while accountants provide overarching financial advice and tax guidance.
Can bookkeepers prepare financial statements? ›
Yes, a bookkeeper can prepare basic financial statements. These statements, such as the income statement and the balance sheet, are derived from the regular bookkeeping work they perform, like recording daily transactions and ensuring all financial data is accurate and current.
What are the differences and similarities between bookkeeping and accounting? ›
Bookkeeping and accounting are essential functions for every business. Bookkeeping refers to recording Financial transactions. On the other hand, accounting is for interpreting, classifying, analyzing, reporting, and summarizing those financial transactions.
What pays more, accounting or bookkeeping? ›
Salaries are typically based on education, certification, years of experience, credentials, industry or employer, job description, location, and complexity of work. According to the U.S. Bureau of Labor Statistics for 2021, the national average salary for bookkeepers was $45,560 and for accountants was $77,250.
But, one should note that both these concepts are different. Bookkeeping is restricted to the recording of financial transactions. But, accounting also deals with the interpretation, analysis, reporting and summarization of financial data. Let us understand the difference between bookkeeping and accounting in detail.
What is the major problem with selling on credit? ›
What is the major problem with selling on credit? It makes production scheduling more difficult. You can't legally set a date when customers must pay their bills. Selling on credit opens the door for fraudulent purchases.
What is the difference between accounting and bookkeeping Quora? ›
Bookkeeping is the process of recording financial transactions, while accounting is the process of analyzing, interpreting, and communicating financial information.
What are the main responsibilities of a bookkeeper? ›
A Bookkeeper job description generally includes:
- Recording transactions such as income and outgoings, and posting them to various accounts.
- Processing payments.
- Conducting daily banking activities.
- Producing various financial reports.
- Reconciling reports to third-party records such as bank statements.
"A bookkeeper records the financial transactions of an organization and takes care of day-to-day functions such as recording sales and invoices, paying bills and processing payroll," Stephens said. "Accountants take the financial data and analyze it to help organizations make financial decisions."
Is being a bookkeeper hard? ›
Is bookkeeping hard? The short answer is no. It's a common misconception that you need a formal education to be a bookkeeper, but anyone with solid math skills and the right resources can do it. Bookkeeping usually involves categorizing and entering financial data into an accounting system.
Is bookkeeper considered an accountant? ›
Bookkeepers and accountants sometimes do the same work, but have a different skill set. In general, a bookkeeper's role is to record transactions and keep you financially organized, while accountants provide consultation, analysis, and are more qualified to advise on tax matters.
Do I need both a bookkeeper and an accountant? ›
A profitable business needs both. And your bookkeeper and accountant should work in partnership together so you benefit from their combined skill sets.
Does a bookkeeper need more accounting skills than an accountant? ›
While there are certain similarities and overlaps between the two, there are distinctions that set these two roles apart. Bookkeepers don't necessarily need higher education in order to work in their field while accountants can be more specialized in their training.
