In this post, we are going to highlight the difference between bookkeeping and accounting. Essentially, bookkeeping is the process of recording the financial transactions of your business. Accounting, on the other hand, is the process of interpretation, analysis, and classification of the recorded information. It logically follows, then, that the two financial terms are interconnected. Read on to learn some more differences between accounting and bookkeeping.
1. Bookkeepers and accountants have different responsibilities
As a rule, the primary responsibility of a bookkeeper is to maintain and regularly update the general ledger of your company. Your bookkeeper should be able to determine how much money you owe to other companies or utility providers and how much money you should receive. In addition, he or she will also issue invoices for the sales you make and manage your payroll.
An accountant, on the other hand, will look at the information recorded by the bookkeeper and should be able to tell you what it means. If the bookkeeper specializes in “financial diagnostics,” an accountant is the one to prescribe the “financial treatment,” if such is needed.
Your accountant will prepare your balance sheets, as well as your income and cash-flow statements. Moreover, the accountant also performs some analytical functions. He or she will analyze the entries that the bookkeeper has made in your company’s journals or in the general ledger. Subsequently, the accountant will offer their professional opinion of the current financial condition of your business.
2. Accountants file company tax returns
When the time to file your company’s tax return comes, you should turn to an accountant for help, and not to a bookkeeper. The role of the latter is just to present an accurate record of all of your company’s transactions throughout the fiscal year. In contrast, the accountant’s role is to analyze this information and come up with adequate tax advice.
3. Head accountants participate in the company’s general meetings
It is not uncommon for chief accountants to participate in the company’s general meetings and inform shareholders of its current financial condition. On the other hand, bookkeepers usually work under the supervision of an accountant. Their job is to prepare the raw fiscal data, on the basis of which the accountant will prepare their presentation.
4. Accountants make financial forecasts, while bookkeepers collect current fiscal data
The primary task of a bookkeeper is to record all of the company’s daily financial activities with meticulous precision. Accountants, on the other hand, are qualified to make short and long-term forecasts about the future of your business. If you don’t like the outlook, you can ask your accountant what you need to do so as to improve it.
5. Bookkeepers and accountants go through different training
Normally, one can start work as a bookkeeper with an average secondary education diploma. No further qualification or training is needed. Everything there is to know about bookkeeping, one can learn on the job. To succeed in their career, a bookkeeper needs a sharp eye for detail and strong nerves because the workload can sometimes be overwhelming.
To become an accountant, one must enroll in and successfully complete a four-year university program in accounting. Holders of university degrees in the fields of finance or economics are also allowed to open an accounting practice.
In contrast to bookkeeping, accounting provides more opportunities for career growth. After several years of experience as a junior accountant, one can become a senior accountant and, later, a chief accountant. With further professional and academic training, one can even become a Certified Public Accountant.