Accounting vs Bookkeeping: Definitions and How They Differ
To be a successful business owner, you need accounting and bookkeeping to stay on top of your finances. These business aspects help keep your financial data current and accurate, giving you the information you need to make sound business decisions for implementing healthy cash flow strategies.
Although accountants and bookkeepers often work side by side and the job titles are used interchangeably, significant differences exist, particularly in the work conducted in each career and the skills and attributes needed to be successful.
Are you considering hiring an accountant or bookkeeper for your small business? Do you want to know the different aspects that set accounting apart from bookkeeping? Then this post is meant for you.
This article will explore the definitions of accounting and bookkeeping and their key differences to give you clarity if you’re often confused between 1 and the other. You will also be able to decide which of the 2 best suits your business.
Table of Contents
What Does an Accountant Do?
Understanding and pursuing accounting requires someone to have excellent logic skills and the ability to solve big-picture problems.
Accountants use small data from the bookkeepers to draw much more significant and broader conclusions. Their responsibility is to conduct routine audits to ensure that statements and books follow ethical and industry standards. Accountants perform a few critical tasks, including preparing tax returns, conducting systematic reviews of various financial statements, and performing account analysis.
What Does a Bookkeeper Do?
The art of bookkeeping has been around as long as there has been commerce—predicted to be around 2600 B.C. The primary responsibility of a bookkeeper is maintaining complete records of all money that has come into and gone out of the business. They consistently record daily transactions (e.g., sales and expense receipts) on a general ledger in an easy-to-read way, enabling accountants to do their jobs.
Bookkeepers perform vital tasks, including posting debits and credits, producing invoices, recording financial transactions, managing payroll, and maintaining and balancing ledgers, accounts, and subsidiaries.
Accounting and Bookkeeping: The Key Differences
People often see bookkeeping and accounting to be 1 profession. They may seem similar, but there are striking differences between the 2. To resolve this confusion, we’ve listed down the accounting and bookkeeping key differences:
Bookkeeping keeps the records of all financial transactions properly and systematically. Meanwhile, accounting calculates the economic situation and communicates the data and information to relevant authorities.
Whether you need someone proficient in law firm bookkeeping, know how to work a retail POS system Canada, or specialize in other industries such as insurance and health, a bookkeeper can review, research, and implement software solutions and internal controls to streamline the business and enhance performance.
On the other hand (and as briefly stated), an accountant ensures the accuracy of the financial documents the bookkeepers recorded.
Accountants in Malta, for example, can also offer help when you need professional guidance on cost reduction, revenue enhancement, and profit maximization for your small business.
Most accountants and bookkeepers have a college education, although not all jobs need one. You can hire a bookkeeper from high school, but that’s not always the case for every employer. Other employers hire bookkeepers who hold associate degrees.
Although a bookkeeper can’t be considered an accountant, they may start working for a small business to gain experience. They may then go back to school for a degree in accounting or finance. This is an excellent opportunity for those interested in this career to further their existing financial knowledge.
Since accountants and bookkeepers work with numbers and financial data all day long, those who are into math have a good shot at pursuing these careers.
While there might be no formal educational requirements for a bookkeeper, someone pursuing this career must be knowledgeable about financial topics and accounting terms and strive for accuracy.
It doesn’t matter how small a mistake seems; it can accumulate over time and lead to more significant, costly, and time-consuming problems. A competent bookkeeper can also multitask since being one means you have to juggle 5 or 6 smaller jobs.
On the other hand, being an accountant means paying attention to various figures and financial data. It’s also crucial to possess sharp logic skills and problem-solving abilities. As outlined above, accounting is key to drawing much more significant and broader conclusions about a company’s finances.
Accounting offers more upward mobility and income potential for a long-term career than bookkeeping. The educational requirements may seem competitive in this field, but the payoff down the road can be considerably higher.
On the other hand, bookkeeping is a good starting point, especially for someone interested in the field but not fully committed and who wants to test the waters. You can also pursue a career in bookkeeping if you seek a job with a respectable salary and excellent security but are not searching for a more long-term career. This offers much lower barriers to entry than accounting, and the competition will be less fierce in the field.
As a business owner, you should know which professionals best suit your company’s needs. That said, you must determine whether you need a bookkeeper or an accountant to keep track of your financial affairs. The list of differences between the 2 may help you make a wise decision for your business based on the information you’ve read. You may want to hire a bookkeeper if you have small inventories, a less complex business structure, and want to fulfill a moderate salary budget. We recommend choosing an accountant to monitor and record complex transactions, especially when you have more extensive inventories.