The Fundamental Difference Between Bookkeeping And Accounting

Recognize the differentiation between accounting and bookkeeping. Image: Flickr
Recognize the differentiation between accounting and bookkeeping. Image: Flickr

Accounting and bookkeeping are essential functions required for businesses and while numerous people use these terms interchangeably, there are significant differences between them.

The biggest difference between them is that accounting revolves around analysis, the examination of financial information and presenting it in a manner that’s beneficial to business.

On the other hand, bookkeeping is essentially recordkeeping and involves recording information properly. Although there’s some overlap in their duties, here’s an overview of their differences.

Bookkeeping versus Accounting

Bookkeeping is s a system within the wide accounting discipline and the process involves organizing and recording significant financial information in a chronological order. A bookkeeper accumulates, organizes, and stores a business’s financial information.

The role also involves the assessment of the financial data in an effort to ensure the smooth running of daily operations. Most bookkeepers also assume the role of generating financial statements, issuing internal reports, and filing tax returns. Most organizations hire bookkeepers on a full-time basis while others hire them to work part time during certain periods of the year.

On the other hand, accounting is a discipline where experts use their knowledge of accounting practice and theory to establish the procedure an organization follows to record its data. Once they’ve collected the necessary information, they analyze it to provide business leaders with important information concerning the entity’s weaknesses and strengths.

In turn, organizations can use this information to develop improvement strategies, prevent or identify fraud, plan wisely for tax period, and prepare for future development.

Accountants can make proposals to management on spending, can help an organization decrease tax obligations, and evaluate a company’s financial health based on financial statements. Furthermore, they can help the organization appeal to stockholders and investors for funding or selling stocks. They are also responsible for designing internal controls to oversee the bookkeeping system and identifying losses.

Educational Requirements

When it comes to being a bookkeeper, the role doesn’t require much of an educational background. You’ll find that a high school diploma is typically enough and most of the training takes place on the job. Nevertheless, fundamental math skills, attention to detail, and acquaintance with the commonly used computer programs are helpful.

In fact, in numerous small businesses, a family member or the owner initially acts as the organization’s bookkeeper. While most employers expect a high school diploma, some prefer an associate’s degree in business or bookkeeping. Others however, seek certified bookkeepers.

Conversely, an accountant needs at least a bachelor’s degree in accounting. An accountant may even obtain a CPA qualification or Master’s in Business Administration. To become a Certified Public Accountant, you must meet an experience requirement and pass the standard examination administered by the American Institute of CPAs.

Employment Options

Bookkeepers can find employment in big and small businesses. After all, any organization that runs a ledger and payroll requires a bookkeeper to maintain company information in order. Therefore, they can work at restaurants, doctor’s offices, or any kind of business that needs their business examined occasionally.

Accountants on the other hand, can find employment in larger companies. You’ll discover that their ability to spot issues in a company’s financial records and resolve those issues make them indispensable in huge firms but unnecessary in smaller ones.

Some accountants opt to work freelance and resolve issues spotted by bookkeepers in small businesses before moving to another company. In bigger companies where full-time accountants are required, accountants may serve as managerial personnel over bookkeepers.

While accountants usually start at the bottom, they have an opportunity to work their way up to become partners at the company. Furthermore, if accountants desire to reside in smaller cities or towns, they may start their business and cater to the community’s accounting needs.

Final Thoughts

Many people mistakenly believe that accounting and bookkeeping are the same yet there are apparent differences between the two fields, ranging from roles to educational requirements. In case you’re still uncertain about the distinction, this guide will prove invaluable.

Dailey Bookkeeping Services is a Xero Certified SILVER Partner and a QuickBooks Online Certified Advisor, so if we can help you with your bookkeeping needs, just give us a call, we would love to help you!  The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Silver Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can!  Feel free to visit our website at http://www.daileybookkeeping.com.

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7 thoughts on “The Fundamental Difference Between Bookkeeping And Accounting

  1. Hi,
    Thanks for being sharing such an important information. I would like to add more.

    Bookkeeping and accounting is a valid way of recording transactions in a professional manner so that the information could be used in the ascertainment of many other important business principles such as the profits or losses made, who owes you and how much; how much you owe others, or are you carrying enough cash in the business for meeting immediate duties etc.

    I think it relevant now to define Accounting as a system of summarising financial transactions and recording in such a manner as to promote using such records for later analysis, preparation of further financial statements, statement of accounts and communication as required.

    Regards
    Christopher Jones

  2. Great tips, I think that every business owner should get to grips with some form of bookkeeping software, there’s plenty of free ones available and they don’t take too long to get used to. They make things so much easier, otherwise you just spend hours on end getting lost and confused in your finances!

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