It is vital to understand the difference between bookkeeping and accounting. Bookkeepers and accountants both work upon financial data while helping you in managing your finance. These roles often coincide because of resource constraints. Seldom might a bookkeeper work as an accountant. To be more accurate and precise, bookkeepers record the financial transactions, which are later analyzed and interpreted by accountants.
But today, all of such services are available online; many bookkeeping solutions can be found where all of this work is done by particular people hired for it. Bookkeeping is the essential beginner step to accounting. An analogy can be to think of bookkeepers as the athletes who begin the relay. The bookkeepers lay the foundation for an accountant by making a record of financial transactions. Once this is done, the records are handed over to the accountants, who are then responsible for taking it forward.
Recording the transactions help the owners keep track of how much money is entering or departing the business. Some common tasks of bookkeepers are given below:
- Registering income from services as well as expenses: rent, office supplies, utilities.
- Managing payroll, not a core bookkeeping function.
- Creating invoices and making payments depending on the arrangement with them.
- Comparing balances to see if the balance in books and transactions match, otherwise record discrepancies.
- Tracking payable and receivable accounts, follow up with late payers, pay your own business accounts on time.
- Managing a general ledger, master accounting document storing all financial transactions.
But it is advisable to use artificial intelligence, and a lot of resources are available that could help you automate your bookkeeping.
On the other hand, accounting interprets, analyzes, and makes a financial record of the recorded data. It provides more in-depth insights on how much money in entering and departing the business, and hence, you would not want to hire an accountant to only record money and expense. Generally, an accountant performs the following tasks:
- Preparing financial statements, balance sheets, income flow, cash flow statements.
- Analyzing journals and ledgers, accountants identify incurred expenses that have not been yet recorded.
- Providing tax advice, completing tax returns’ filing process.
- Offering financial advice, helping you understand the consequences of your financial decision.
Although you might be aware now that an accountant and a bookkeeper are much different than many people think, below are certain similarities between the two:
- They both work with financial data.
- They share a common goal of enhancing the financial health of a business.
- Both require basic accounting knowledge.
- Both are tax compliant.
Also, notable differences between an accountant and a bookkeeper and their work are:
- A bookkeeper needs 2-4 years of experience and an associate degree, while an accountant requires a bachelor’s degree in terms of eligibility.
- An accountant is benefitted to have extra certifications while a bookkeeper does not inevitably require these.
- The bookkeeper only records and classifies financial transactions while the accountant analyzes, interprets, and provides subjective advice.
- The bookkeeper also prepares bank reconciliation and general ledger while an accountant prepares financial statements on them.