Accounting is the process by where a company’s financials are recorded, summarized, analyzed, consulted and reported on. Bookkeeping is the recording part of this process, in which all of the financial transactions of the business (consisting of income and expenses) are entered into a database.
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What Is the Difference Between a Bookkeeper and an Accountant?
NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice please contact an accountant in your area.
What Is the Difference Between a Bookkeeper and an Accountant?
An accountant is in charge of assessing and interpreting the financial data of a company, and for reporting on it. An accountant has a higher skill set than a bookkeeper, whose primary responsibility is handling the actual recording of the company’s financial transactions.
An accountant usually has a degree or certification (CPA), and is paid better than a bookkeeper. Typically, a bookkeeper reports to the accountant.
A bookkeeper does not require any formal training, however a bookkeeper’s job is important. The information a bookkeeper is responsible for gathering and managing affects how an accountant will interpret the financial information of the company. Based on this information, the accountant provides recommendations to management or the company’s owners about spending, tax issues or other financial concerns.
What Are the Duties of a Bookkeeper?
The duties of a bookkeeper vary, depending on the company. Here is a breakdown of the responsibilities typically associated with a bookkeeping role:
Recommend, implement or manage accounting software for the development of a single or double entrysystem of accounting.
Recommend, implement and monitor bookkeeping policies and procedures.
Develop credit and debit accounts, including the assigning of expense categories.
Enter expenses and income into the software, including non-digital methods of payment such as cash and checks.
Handle banking activities including new deposits.
Train staff on the use of relevant bookkeeping software (such as how to enter expenses).
Verify recorded expenses are within company’s policies, and manage approvals.
Verify the accuracy of information and that the accounts balance (if a Double Entry system).
Maintain records, and backup and archive as necessary.
Assist the accountant in the preparation of financial statements (or depending on the type of statements required, prepare them himself).
Ensure bookkeeping adheres to accounting best practices and government regulations.
Assist with audits.
Flag discrepancies.
A bookkeeper also has a duty to keep the information he processes confidential, as he will be privy to sensitive financial information, including payroll salaries.
What Are the Duties of an Accountant?
The duties of an accountant can be broken down into four areas:
Overseeing how data is stored, managed and updated. For instance, a bookkeeper might recommend the software for a double entry system of accounting, but the accountant would approve it.
Financial Analysis and Consultation
Properly assessing data and advising management.
Financial Reports
Being able to generate the standard business reports and statements required by businesses and the IRS.
Regulatory compliance
Being up to date on government regulations and ensuring the company is following industry standards.
Can Bookkeepers Call Themselves Accountants?
An accountant typically has a degree and relevant work experience, however, there is no formal certification process for becoming an accountant. A bookkeeper could call himself an accountant but it would be inadvisable to do so unless he had the relevant education or some serious working experience that included the various facets of accounting (as listed above).
A bookkeeper cannot call himself a CPA (Certified Public Accountant) unless he achieves the designation. A CPA is earned after completing specific educational and work requirements, and passing an exam. Qualifications for becoming a CPA vary from state to state.
Do Accountants Do Bookkeeping?
Yes, they can and do. Some small companies may not have an official bookkeeper, so an accountant will also take on the responsibilities of a bookkeeper too. Or the bookkeeping duties may be assigned to an accountant with less work experience.
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Bookkeeping focuses on recording and organizing financial data, including tasks such as invoicing, billing, payroll and reconciling transactions. Accounting is the interpretation and presentation of that financial data, including aspects such as tax returns, auditing and analyzing performance.
Accountants have higher salary and growth expectations than bookkeepers. To maximize earning potential and secure long-term job stability, it's worth pursuing a career as an accountant.
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.
Your bookkeeper will also not be able to file corporation tax returns, calculate your capital gains tax and prepare management accounts, business plans or cash flow forecasts. These should all be handled by an accountant.
"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."
Many bookkeeping professionals agree that their profession does not require any supernatural skills. As far as newcomers to the accounting industry are concerned, they certainly have a hard time at first. Yet, the same can be said about any other profession. All skills and abilities come only with time and experience.
Bookkeepers help businesses keep their finances on track by keeping tabs on different accounts, transactions, and reports. They collect, organize, and store the business's financial records, including cash flow statements, reconciliation statements, and profit and loss statements.
What are the Golden Rules of Accounting? 1) Debit what comes in - credit what goes out. 2) Credit the giver and Debit the Receiver. 3) Credit all income and debit all expenses.
Generally, an accountant or owner oversees a bookkeeper's work. A bookkeeper is not an accountant, nor should they be considered an accountant. Bookkeepers record financial transactions, post debits and credits, create invoices, manage payroll and maintain and balance the books.
This choice primarily depends on the industry and the level of expertise required. A bookkeeper is generally: Less expensive to employ. A great choice for handling daily transactions and repetitive processes.
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.
Will depend on any restrictions being member of ICB places on you but anyone can file a set of accounts at Companies House for a limited company provided doesnt require an audit.
It automatically books the double-entry, meaning debit and credit. For example, when you write a check to pay the utility bill and enter utilities expense, QuickBooks makes the entry hitting both the checking account and the utility expense account.
Bookkeepers can help you save money: While there are costs associated with hiring any new staff member, ultimately, hiring a bookkeeper will help you save money. Knowledgeable, professional bookkeepers can help you avoid financial penalties and point out ways your company can save money.
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. Another key difference is their pay scale.
Bookkeepers earn a median annual salary of $45,860, according to the U.S. Bureau of Labor Statistics (BLS). However, a bookkeeper's salary varies depending on their education, location and level of experience. The BLS projects employment for bookkeeping, accounting and auditing clerks to decline by 6% by 2032.
Freelance bookkeepers set their own rates and often charge an hourly rate of $40-60. If a freelance bookkeeper has multiple clients and works full-time, they frequently earn more than the salaried bookkeeper's $35-40,000 per year.
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