The value of bookkeeping and accounting extends to assisting the business in assessing its value and timely decision-making for the future. Additionally, it makes it possible for companies to confidently track their success. Furthermore, it offers data that can be applied to broad strategic decisions.
Like many people, you also might think that bookkeeping and accounting are the same. This is a common misconception—let’s clear it up for you.
Key Differences between Accounting and Bookkeeping
Accounting and bookkeeping are crucial components of managing your finances. Despite their apparent similarity, there are a few significant distinctions between the two.
They may have some comparable objectives, but they focus on various phases of a company’s financial cycle.
1 – Certifications
The main distinction between a bookkeeper and an accountant may be in their certifications.
To serve as a bookkeeper, a person does not necessarily have to have any particular certification or formal schooling. However, they must be accurate and have a working knowledge of fundamental financial concepts.
On the other hand, an accountant will normally require a bachelor’s degree or higher in accounting or finance.
Due to the nature of their work, accountants have the opportunity to gain professional certifications that could further their careers and lead to greater salaries. The CPA credential is one of the most popular among the various certifications available for accountants.
2 – Objectives
As was already mentioned, while accounting and bookkeeping share many common goals, they still serve quite different purposes.
The primary objective of bookkeeping is to scope out any fraud or irregularities in addition to recording transactions. By doing this, bookkeepers are better able to see the company’s financial situation and address problems as they come up.
The financial realm of accounting is more expansive. Accounting encompasses the idea of protecting business assets in addition to the evaluation of financial records that the bookkeeper has created.
Accounting professionals can identify whether money is being misapplied or misappropriated by carefully examining financial records.
Accountants review and communicate the financial data to the organization’s relevant divisions, institutions, and stakeholders.
3 – Skillsets
Bookkeeping and accounting require different skill sets for each role, in part because of the credentials needed. While these skills can certainly be similar, there are some significant differences:
- Problem-solving: Expert problem-solving skills are undoubtedly required in both disciplines. While the discrepancies are found by the bookkeeper, the accountant thereby can resolve the issues and move forward with the solutions brought by them exclusively.
- Detail: Both accounting and bookkeeping necessitate great attention to detail. Making sure that records are accurately recorded so that the accountant can review them is part of a bookkeeper’s responsibility.
Accountants not only need to guarantee that the information the bookkeeper gives is valid, but they also need to be able to recognize any discrepancies or issues within the reporting, otherwise, the analysis can be erroneous.
- Mathematics: Both, accounting and bookkeeping come up with daily basic mathematical operations, but, more complex operations such as exponents, ratios, and percentages are a part of the accounting process.
| Key Differences | Accounting | Bookkeeping |
| Practices | Different entities may have different accounting practices and approaches to understanding and analyzing financial reports. | The bookkeeping procedure complies with accounting principles and practices. |
| Procedure | The procedure of bookkeeping does not include financial statements. | The accounting procedure is used to create financial reports and statements. |
| Expertise | Bookkeeping is mostly a clerical task. There are no specialized skills or knowledge needed for bookkeepers. | Accounting calls for the expertise of an accountant as well as familiarity with numerous accounting procedures and principles. |
| Goals | To summarize the impact of all financial transactions made by a business over a specific period is the goal of bookkeeping. | Accounting’s goal is to comprehend and analyze financial data so that users may make wise decisions. |
| Dedication | The goal of bookkeeping is to preserve an organized, chronological record of financial activity and transactions. | Accounting is used to compile information on a company’s operating performance and financial health. |
| Production | The process of bookkeeping produces data that is used as input in accounting. | Accounting produces financial statements that can be used to make defensible decisions. |
| Correlation | Accounting’s base or foundation is bookkeeping. | Accounting creates financial reports and statements using the data provided by bookkeeping. |
Roles of an Accountant and Bookkeeper
1 – Roles of an Accountant
A bookkeeper’s job is very detail-oriented, but accountants typically take a more comprehensive approach. Some of their responsibilities are listed below:
- Assisting to apply for business loans: Having an accountant on hand is beneficial if a lender asks you challenging questions about the performance of your company because they have a handle on the overall finances of your company.
They may also be able to assist you with the interest rates, terms, and conditions of any financing offer you receive.
- Preparing and filing tax returns: During tax season, accountants play a significant role. Their expertise helps minimize your tax liability, or how much you pay in business taxes, and makes sure everything is filed correctly.
Working with one reduces your risk of being subject to an Internal Revenue Service audit for a tax filing mistake.
- Giving financial planning advice: Accountants can assist you to establish the optimal business structure in the initial stages of your organization and typically remain valued consultants going forward.
It can even be worth having them involved before you’ve finished developing your business plan so they can offer financial predictions and financial planning recommendations.
3 – Roles of a Bookkeeper
The core of business bookkeeping is maintaining precise records of every financial transaction. For this, bookkeepers are expected to have involvement in the daily operations of a business. These are some of the responsibilities that they are responsible for:
- Recording transactions: The general ledger, a central document that displays credits, debits, and balances for each financial account, should be updated each time money enters or leaves your business. Among other things, that transaction might be a sale, buy, or bill.
- Reconciling bank accounts: This operation, which is typically performed once a month, makes sure that the recorded transactions correspond to the bank statement for that month.
- Handling accounts receivables and payables: Sending invoices, establishing payment conditions, ensuring clients pay on time, and locating past-due payments are all examples of managing accounts receivable. Managing accounts payable involves seeing to it that suppliers are paid.
- Managing payroll: Bookkeepers can read time sheets, compute deductions, and handle payroll.
- Preparing important financial reports: These comprise the balance sheet, statement of cash flows, and profit and loss statement.
- Maintaining the charts of accounts: A company’s chart of accounts is put up by bookkeepers, who also ensure that there aren’t too many or too few accounts. If the chart of accounts is configured improperly, minor errors can eventually grow into more serious problems.
| Accountant | Bookkeeper |
| Carrying out regular audits | Keeping daily and monthly financial records |
| Making use of account analysis | Check for mistakes in the budgets, invoices, and account analysis. |
| Looking over financial statements | Reconciling the accounts in the bank |
| Filing and preparing corporate tax returns | Recording journal entries |
What Is A CPA?
A CPA offers a higher level of credibility and experience. A CPA is an accountant who has passed specific exams in addition to meeting all licensing and legal standards set forth by a state in order to receive certification from that state.
With the creation and reviewing of financial statements, CPAs are also responsible for producing tax returns for firms and even individuals, signing tax returns, and also coming up with representing taxpayers in front of the IRS for different concerns, as well as for audits.
What are the duties of a CPA?
A wide range of accounting, auditing, and tax-related tasks are carried out by certified public accountants. By accurately reporting income and paying taxes, these qualified specialists make sure that private companies, organizations, public companies, and governmental bodies comply with the law.
The analysis of a company’s operations and organizational structure, as well as providing management with tax-related advice, is one of the CPA’s key responsibilities.
Certified public accountants also serve as consultants in matters pertaining to pay, benefits for employees, computer systems, and asset protection.
Strategic planning, budget creation, fraud prevention, contract negotiation, dispute resolution, and tax preparation and filing are among the activities that CPAs commonly engage in.
Additional responsibilities for certified public accountants include preparing financial statements and reports, examining ledgers, managing accounts payable and receivable, and projecting revenue and expenses.
Professional CPAs are typically required to oversee a company’s financial operations, spot anomalies, examine them, and provide solutions.
A certified public accountant may work for a public accounting company, a private business, a government agency, or both.
You cannot have an accountant who is not a CPA represent you before the IRS. This distinction is crucial, which is why firms frequently collaborate with a CPA who reviews their books, offers tax advice, and prepares and electronically submits business and individual tax forms, among other services.
An experienced CPA can help you to file your taxes and can offer you the best advice to keep up your business with the changing regulations. Get help today to save your time and money.
Conclusion
With good reason, bookkeepers and accountants are frequently confused by the people. Some differences set these two roles separate, even though there are certain similarities and overlaps between them.
Finding one’s specialization in the industry and advising businesses on who to hire for their needs can both be facilitated by understanding the differences between the two.
