Accounting vs Bookkeeping!
Apparently both professions looks similar, but in reality there are not. There is a difference which beginners should know.
In this article, we’ll be discussing similarities and differences between accounting and bookkeeping.
What is Bookkeeping?
Bookkeeping is mainly entailed to keeping track of the money coming in and going out of a business. This field requires superior mathematics skills and enhanced attention to detail. Bookkeeping usually consists of the following:
- Records of financial transactions – payrolls, bill payments, sales, and purchases
- Making sure every penny of the company’s money is accounted for
- Making invoices
- Providing information in reports – debtor and analysis reports
- Creation and update of daybooks
- Maintaining the company’s ledger
What is Accounting?
On the other hand, the responsibilities of accounting deal with overseeing accounts, production of financial statements, and tax returns according to the law. An accountant’s job is to inspect all the financial information and make sure whether it is accurate or not. This data is then analyzed to offer insights, aiding in smart business decisions.
Moreover, accountants assess he operations to make sure all the financial aspects of the company run smoothly. An accountant’s job description mainly entails the following:
- Constructing balance sheets – a snapshot of the financial situation of the organization at a specific time
- Income statements – Record of expenses and income over the passage of time
- Record of cash flowing in and out in accounting software
- Identifying any unrecorded expenses by analyzing ledger entries
- Giving tax advice
- Offering vital financial advice and providing an outlook of the possible outcomes of certain financial decisions
Accounting Vs Bookkeeping – The Similarities
To someone who is not familiar with the field, both accounting and bookkeeping can appear to be quite similar, as both deal with financial data and require basic accounting knowledge. Moreover, they both share a common goal of enhancing the financial situation of the business.
Differences between Accounting and Bookkeeping
Bookkeepers and accountants usually work hand in hand to improve the financial situation of an organization, and this might be the reason why some small businesses have one person to do both of the jobs. However, the difference between the two careers is eminent:
Bookkeeping does not require any specific education and anyone with exceptional math skills can do the job easily. In contrast to this, the pre-requisite for accounting is an undergraduate degree in accounting or any other finance related field.
Additionally, accountants must be aware of financial laws and ethical issues as their role revolves around providing advice and understanding financial data.
2. Responsibilities & Skill Set
While bookkeepers have just the task of keeping strict check over the money that comes and goes out of the organization, an accountant is given the responsibility of almost every financial aspect, including handling taxes, assessing risks and making reports. Bookkeepers are not required to go through any formal training and typically report to accountants.
3. Job environment
Bookkeepers usually only work for small businesses. Since a job of an accountant is more dynamic, the job prospects are also wider as they can work in a number of places, like tax and government agencies, and financial institutions. Adding on, as an accountant has a certification (CPA) or undergraduate degree, he is paid better in comparison to a bookkeeper.
Bookkeeping usually has two types – single entry and double entry. A single entry contains either a debit or credit transaction, while double entry accounts for both, i.e. for every debit there is a corresponding credit entry and the other way around.
Types in the accounting department include preparing the organization’s budget and planning loan proposals, plus offering advice to the employers on how to go about financial situations to enhance profit.
5. Objectives (Accounting Vs Bookkeeping)
In bookkeeping, one is responsible for Keeping all records of all financial transactions organized systematically. While in accounting, one is responsible to gauge the financial situations and relay the information further to relevant authority.
The Bottom Line
Even though bookkeeping and accounting differ from each other, they are both linked – no job is more important than the other and they both share the common goal of boosting business for the people they work for.
Now that you can differentiate between bookkeeping and accounting, you can see how vital each profession is. The information a bookkeeper gathers and manages is closely tied to how the accountant will interpret the financial information for the organization and then provide recommendations about any concerns related to finance. One lays the groundwork, so that the other can guide the company to success.
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