Most people find it confusing to depict the difference between bookkeeping and accounting. At the same time, both bookkeeper and accountant share similar financial goals and support business in various stages of the accounting process.

Every business must prepare bookkeeping and accounting processes at the quarter or end of the year. Both help businesses in evaluating and making future decisions wisely.

Sometimes people feel bookkeeping and accounting are interchangeable, but this is not the case, and both are different and inseparable. 

Simple bookkeeping records a business’s day-to-day financial transactions, whereas accounting is more personalized and majorly focuses on the big picture.

This article will explain the major difference between accounting and bookkeeping and their roles. 

Bookkeeping

Bookkeeping is a process of maintaining and recording day-to-day financial transactions consistently. It involves keeping records of the company’s dealings in a systematic order. It usually preserves the book of accounts, including sales revenue, interest income, loans, payroll, and many tasks. This book of accounts needs to be updated consistently. Bookkeeping is essential to run a business successfully as it gathers all the financial accounts.

Functions of Bookkeeping:

Bookkeeping is composed of the following:

• Recording daily financial transactions

• Maintaining invoices

• Preparing finance statements, i.e., cash flow statement, balance sheet, income statement, etc.

• Finish off payroll

• Maintain general ledgers (maintaining sales reports and expenses)

The complications of bookkeeping sometimes depend on business size, whether small or large, and the number of weekly or daily transactions. 

Accounting

Accounting is a crucial process that involves summarizing, analyzing, and reporting a business’s financial transactions. It is subjective and helps companies maintain and record their finances accurately and over a particular time. It compiles financial statements, i.e., balance sheet, income statement, and cash flow statement. Accounting offers businesses the ability to track their performance and make future decisions wisely. It also leads to a better understanding of business cash flow and profitability. It also helps businesses with tax filing, planning, forecasting, and more.

Functions of Accounting:

Accounting is composed of the following:

• Recording and reviewing financial statements of business

• Inspection of cost of operations

• Finishing income tax returns

• Produce adjusting entries

Difference Between Bookkeeping and Accounting:

Listed below are the significant differences between bookkeeping and accounting:

1. Bookkeeping is the basis of accounting. At the same time, accounting is related to preparing financial statements and reports as per bookkeeping information.

2. Bookkeeping is a smaller segment of the accounting system, whereas accounting provides a bigger picture and starts where bookkeeping ends.

3. Bookkeeping offers input and information for accounting. Whereas accounting results in providing statements of finances and help in making improved business decisions.

4. Bookkeeping records and maintains financial transactions and activities. Whereas accounting is to provide financial strength analyses and cost of operations.

5. Bookkeeper is the person who is responsible for bookkeeping. Whereas an accountant is responsible for accounting.

6. Bookkeepers require no prior skills or knowledge. Whereas skills and expertise are required for an accountant related to accounting.

7. Bookkeeping process does not include financial statements. Whereas financial statements and reporting are a part of accounting.

8. Bookkeeping summarizes financial transactions and their effect on a business for a particular period. Accounting’s main objective is to analyze financial reports and information for informed decisions.

Bookkeeper vs. Accountant: The Roles

People get confused about the roles and work of bookkeeping and accounting. Both have the same work, but different skill sets are required. The bookkeeper needs to record financial transactions daily, whereas accountants need to analyze, offer consultations, and give advice related to taxes and more.

 1.Bookkeeper Credentials: As we discussed above, no specific knowledge and skills are required for the role of bookkeeper. They should be dedicated to their work, accurate figures, and know the basics about financial topics.

Usually, account or business owners look at bookkeeper’s work; however, they can not consider themselves accountants, and they have different roles and responsibilities.

2. Accountant Credentials: There is a need for prior skills and knowledge for an accountant’s role. To qualify as an accountant, one needs to have a bachelor’s degree in accounting. As an alternative degree in accounting, finance degrees are adequate. Accountants are also eligible to gain additional professional certificates.

Conclusion:

Bookkeepers provide managed financial records and maintain them. Equally important, accountants and smart financial strategies also provide accurate tax filing. These two contribute to the success of a business. At times, business owners themselves manage finances on their own, or some owners hire others for the role to focus on other aspects of their business.