Are you confused or messed up with thinking, about whom you should hire for your business Bookkeeper or Accountant? Then your worries came to an end, here in this article we have discussed Bookkeeping vs Accounting and extracted the comparative facts. Now it’s up to you, to read the article and decide which one is better for your business. We have prepared this handy guide for you to make you understand the functional differences between accounting and bookkeeping. After reading this guide, you will be able to decide which one to choose. For more info contact us toll-free: +1-844-405-0904
When you run a business, you can’t handle all the jobs and responsibilities. You need different people having expertise in their department to lower the burden and responsibilities. This is the reason why they hire accountants and bookkeepers. But do you know the difference between Bookkeeping vs Accounting? In this article, we will be discussing all these things and how bookkeeping is different from accounting.
Bookkeeping and accounting help you look after and manage the financial section of your business. Hiring them can be a real lifesaver. But whom to choose when. Many experienced business owners are not sure about their differences.
While bookkeeper & accountant both have the same financial goal and their responsibilities may overlap sometimes. Yet there are key differences between them. A small business owner should be aware of these in order to get the best out of them.
Before proceeding further to learn Accounting vs Bookkeeping, it’s essential to know the difference between accountant and Bookkeeper, the role of accountant and bookkeeper in business. So let’s discuss accountant vs Bookkeeper.
Table of Contents
Bookkeeper vs Accountant
The main difference between a bookkeeper and an accountant is that the bookkeeper is responsible for carrying out bookkeeping activities in the company, where the financial transactions are recorded in an orderly manner, whereas, the accountant is responsible for accounting the financial transactions in the past by the company Occur. Also reporting the financial affairs of the company which shows the clear financial position of the company
Accountant credentials
To fit for the title of accountant, a person usually must have a bachelor’s degree in accounting. For those who do not have a particular degree in accounting, a finance degree is often recognized as an adequate option.
Accountants, unlike bookkeeping, are also qualified to get additional professional certifications. For example, accountants with adequate knowledge and experience may earn the title of Certified Public Accountant (CPA), one of the most common types of accounting designations. An accountant must pass the Uniform Certified Public Accountant Examination to become a CPA, and must need experience as a professional accountant.
Bookkeeper credentials
Bookkeepers do not require any formal education. To be successful in their work, bookkeepers need sticklers to learn about accuracy and key financial topics. Typically, the bookkeeper works under the supervision of an accountant or small business owner whose books they are doing. Therefore a Bookkeeper cannot call himself an “accountant”.
The Business Financial Process
The accounting procedure includes recording, deciphering, ordering dissecting, announcing, and outlining budgetary information. Accounting is the way to chronicle a monetary exchange. Recording money-related exchanges are the initial segment of and the establishment of the bookkeeping procedure.
Clerks handle the chronicle of some portion of the accounting procedure. Accountants handle all pieces of the accounting procedure
Bookkeepers record financial exchanges in sequential requests consistently. Because accounting software robotizes a considerable lot of the procedures, a few bookkeepers in little associations likewise order and abridge monetary information in money-related reports. These bookkeepers are regularly alluded to as full-charge accountants. They make higher compensations than bookkeepers yet lower pay rates than accountants. Also, read the top Bookkeeping tips for small business owners.
Role and responsibilities of Bookkeeper and Accountant
Bookkeeping: Role
A bookkeeper is a person who keeps a record of daily transactions and financial operations on day to day basis. Their jobs and responsibilities play a vital role in any business. Keeping the record of a general ledger is one of the main tasks of bookkeeping. They keep an eye on vendors making sure they are paying the correct amount and all the invoices are being paid on time.
Accounting: Role
An accountant performs their task at a higher level than a bookkeeper does. Accounting can be considered a high-level process that uses data recorded by a bookkeeper or business owner to give you insights and help to make important financial decisions. An accountant can help in growing your business.
The main task of an accountant is to make a report which includes all your business’s financial aspects. The goal is to move the company towards profitability and understand the cash flow in the business.
They can prove to be a valuable resource by making you aware of potential business growth or uncertain loss. Overall they can perform all the major tasks that a bookkeeper does plus convert the information recorded by them into insights. Which ultimately helps to make a clear picture of your performance and track.
Bookkeeper | Accountant |
The bookkeeper always records the journal entries and general ledgers | Accountants always prepare files and help in filing a corporate tax returns. |
Always conducting bank reconciliations | Review all the financial statements |
Check errors in budgets and invoices | Accountants perform account analysis |
Recording daily and monthly transactions | Conducts audits |
Documenting business expenses, profit | Completing end-of-year financial statements |
Processing payments and transactions | Analyzing sales trends |
Completing the payroll | Handling your tax filing |
Balanced the books at the end of the month | Helping the business owner make important decisions and understand their impact |
Bookkeeping vs Accounting
The terms “bookkeeper” and “accountant” can be interchanged to a degree, so I’m going to the center of attraction on the literal job roles.
Many bookkeepers get their start acting as data-entry clerks or entry-level bookkeepers for a business and grow, through experience and merit, into being a go-to person for the day-to-day financial recording.
The term “bookkeeper” is pretty literal: The bookkeeper keeps the books and holds on to physical documentation for transactions.
A knowledgeable or certified bookkeeper may eventually move into being an accountant (the wording and rules on what a bookkeeper may do and call themselves may be given instructions by state accounting boards).
An accountant may also target reporting, business inquiry and processes, and possible recommendations. Many times the bookkeeper operates as a “feet on the ground” professional, promoting a stronger connection between an accountant and a business owner with the bookkeeper and accountant working in tandem.
Both bookkeepers and accountants can acquire the certification, if they choose, through a professional organization such as the AIPB (American Institute of Professional Bookkeepers) or the AICPA (American Institute of Certified Public Accountants), respectively.
The terms “bookkeeper” and “accountant” can be used without certification, so it’s valuable to know what qualifications people have, before hiring them. To collect information about the certification like types of certification, and certification cost.
Comparison Chart Between Bookkeeping vs Accounting
Basis of Comparison | Bookkeeping | Accounting |
Definition | Bookkeeping dealings with recognizing and recording financial transactions activities only | Accounting deals with the process of reviewing, evaluating, and reporting the financial data of a business. |
Foundation of Accounting | It is the foundation of accounting | It is the language of business |
Evolution of Financial Statement | Not prepared in the case of bookkeeping | Financial statements are a component of the accounting process |
Analysis | No analysis is required in the bookkeeping | Accounting analyzes the data and generates insights for the business |
Tools | It includes journals and ledgers | It includes a balance sheet, profit & loss account, cash flow statement |
Persons Required | The person involved with bookkeeping is known as a bookkeeper | The person involved with accounting is known as an accountant |
Recognizing Financial Position | Bookkeeping does not determine the financial position of a business | Accounting helps in presenting a clear picture of the financial position of a business |
Level of Training | No high-level learning needed | High-level learning is needed for understanding and explain the accounting concepts |
Read also: 8 Questions To Ask When Choosing A Tax Preparer
Bookkeeper or Accountant: Which Is Right For Your Business?
How do small-business holders figure out what they need?
Many times it relies on the industry and the level of expertise required. Questions we ask our clients in order to format our services include: What industry is the company in? Do they keep up a number of fixed assets or a large amount of inventory? How many employees do they have? The more complex the organization, the more valuable it is to make sure that the company’s bookkeeper is also backed personally by a good CPA who can provide advice as and if needed. It’s a great partnership that keeps communication open and data strong.
Also, it’s not a bad idea to ask for client remarks and proof of purchase of E&O insurance, which is ready for use by both bookkeepers and accountants.
How valuable are bookkeepers and accountants?
Bookkeepers are, less expensive than CPAs, mainly speaking, which makes them a great choice for a company that needs day-to-day knowledge. A good bookkeeper can also act as the “canary in the tunnel”. They can help you point out the thing which needs to be optimized. Pricing relies on geographic location and industry, as well as experience.
I would advise calling around local accounting or CPA firms, other business owners, or even local business-development centers in order to obtain a referral. A bookkeeper is best to construct through word of mouth, and many times you have to look hard because, quite frankly, an excellent bookkeeper gets engaged pretty fast.
I also would highly advise meeting with an accountant or CPA at the onset of a bookkeeper engagement and periodically afterward. Bookkeepers are a considerable way to control, expenses, but having the periodic support of a CPA makes sure that you have more than one set of eyes on the books. This not only helps to provide more accurate data but also can act as a deterrent to fraud or theft.
How do you ensure that you appoint a qualified bookkeeper or accountant?
Ask for citations, and call them. If certified, call the board or organization in which the professional is certified. There are also free screening tests on the marketplace, especially for bookkeepers, who may not always be certified and where the onus is more costly. A referral means a lot.
What other qualities are important for bookkeepers and accountants
Be ensure to explore a bookkeeper and an accountant who can speak to you in plain English. Many financial or accounting professionals attempt this. Also, never be fearful to stand up and say, “I’m not fully accepting what you are telling me. Can you rephrase?” Accounting can be a lot of gobbledygook and is a language all its own. Professionals can be very excellent at what they do, but they also need to be able to explain concepts easily.
A professional demeanor, friendly personality, and honesty are also important. You want to ensure that if there is an entity crucial that needs to be discussed, the discussion is timely — and isn’t put off if it’s disagreeable.
When should you appoint a bookkeeper?
The earlier the better. Many holders will try to sort out the information themselves and then have a bumpy ride when it comes time to transition. A good compromise is to ask an accounting professional when the business is started and then possibly touch base periodically, such as once a quarter.
Ask for a quote or pricing, and fit some sort of periodic meeting into your budget. Errors tend to carry on until taken at year-end or the next time a professional looks at the books. Books that are set up correctly, in the beginning, can be a strong tool for calculation and progress. Books portion the pulse of a business, and good bookkeeping extends past basic cash expenses.
Moreover, the greatest accountants and bookkeepers are satisfied to answer a few questions, and they enjoy being able to look after a business becomes larger and for clients to be beneficial. After all, the basement foundation today could be their biggest client tomorrow.