While 45% of small businesses do not employ either an accountant nor a bookkeeper, many businesses could not do without one or the other or both. If you are looking to hire someone to take care of your business’ financials, you may have questions like “What is bookkeeping?” or “What is an accountant?” While they seem to be the same, they are different in many ways. Bookkeeping vs Accounting: What is the difference? Keep reading to find out what defines each.
Bookkeeping vs Accounting
There are some important differences between bookkeeping and accounting. Their goals for your business may be the same, but the way in which they support a business differ.
A bookkeeper is a person who deals with the ongoing, day-to-day transactions by keeping records for each. Some of the duties outlined for bookkeepers include:
- posting debits and credits
- recording and categorizing any and all financial transactions
- managing and completing payroll
- preparing invoices
- processing receipts and payments
The primary goal or objective of a small business bookkeeper is to handle all financial transactions properly and systematically. The job of bookkeeper does not require any special skills or educational degree, though some hold an associate’s degree. A good bookkeeper is very meticulous and accurate in recording transactions. Working knowledge of financial topics is a must.
It is often said that accounting begins where bookkeeping ends. In the role of an accountant, financial transactions are summarized, interpreted, analyzed and reported to the company’s authorities. An accountant oversees the work of the bookkeeper and analyzes the information recorded. Duties of the accountant:
- prepares all financial statements
- completes tax returns
- calculates and analyzes the cost of operating the business
- compliance and reporting
Critical business decisions are often made based on the data provided by the accountant or accounting team. Financial projections are offered based on past financial performance. While the bookkeeper prepares the ledger, the accountant takes the information to see what the bigger picture is for the company. They use this information to make financial forecasts. Accounting is more subjective in nature, where bookkeeping is pretty straightforward. Working knowledge of the latest tax codes helps the accountant with strategic tax planning for the company. An accounting job usually requires a bachelor’s degree in accounting. Sometimes, a finance degree is sufficient. Accountants, unlike bookkeepers, can pursue additional professional certificates. With experience and additional education, one can become a Certified Public Account (CPA). This is obtained when the experience is coupled with a passing grade on the Uniform Certified Public Accountant exam.
Accountant? Bookkeeper? Both?
Now that you know the difference between bookkeeping vs accounting, what is your plan for your business? Do you only need one or the other? Will having both help your business run better? To learn more about the practices that will help your business thrive, check out our blog frequently for new information.