What is the Difference between Accounting and Bookkeeping
Bookkeeping and accounting are two different services, though they may at first seem the same. Accounting is a broader term that includes more than just bookkeeping. It also includes:
- Tax preparation
- Financial statements
Bookkeeping, on the other hand, is simply recording transactions in an organization’s general ledger. It does not include these different aspects of accounting, which leads to confusion when comparing the two terms.
What Are the Differences
Transactions and Finances
Bookkeepers focus on the day-to-day transactions of a business. They specialize in payroll, accounts payable, accounts receivable, inventory management, sales orders, and invoicing. In addition, their tasks include recording financial data into journals or ledgers from source documents like purchase orders, invoices, or receipts.
Accountants manage the entire company’s finances by analyzing trends within a sector and providing information about those developments for internal use so that companies can make better decisions when it comes to investing money back into their businesses or hiring new employees.
The main goal of bookkeeping is to transfer all necessary records onto financial statements, whereas accountants primarily analyze and interpret those financial statements. This difference is significant as the role of the bookkeeper is more focused on recording transactions, whereas accounting requires a much deeper analysis.
Association with Taxes
Accountants are closely associated with tax preparation and planning while keeping track of all business finances has no direct connection to taxation reports. Accountants help businesses reduce money loss due to poor cash flow management by looking at companies’ spending habits compared to previous years’ trends to determine whether they’re earning enough revenue or need additional funding from outside sources such as banks or investors.
They also inform clients about what areas they should focus on for future growth opportunities based on current market trends. In comparison, bookkeepers keep track of the company’s cash flow and monitor expenses to ensure they stay within a set budget. They may also be required to file tax reports for employees who receive their income from an employer and calculate how much money has been earned in interest or revenue on investments during a specific period.
Level of Expertise Required
To become a certified accountant, individuals must complete an undergraduate degree in business or accounting and have generally spent at least one year working as bookkeepers before sitting for their exam.
In contrast, anyone can perform bookkeeping duties without any special training provided they are capable of basic math skills. Most businesses prefer hiring employees with no prior experience because it’s less expensive than hiring someone who has been trained specifically for record-keeping tasks but may not have the right personality or work ethic for them.
Accountants must complete a bachelor’s degree and pass an exam to be eligible for certification. In contrast, anyone with basic math skills can perform bookkeeping tasks as long as they’re willing to learn the company’s policies and procedures along with its software system.
Companies must understand these differences before hiring employees so that those who are looking for jobs feel confident about what they will be required to do once hired. By doing this, businesses reduce the risk of having unhappy employees on staff, leading to problems down the line if not resolved correctly.