Bookkeeping vs Accounting: What’s the Difference?
Last Updated April 27, 2023
Bookkeeping vs. Accounting the difference is they support your business in different stages of the financial cycle. Bookkeeping is the process of organizing and recording all financial data for a company into a database. Whereas accounting is concerned with the summarizing, analysis, consultation, and reporting of that recorded financial data to business owners and investors.
Bookkeepers have to pay attention to the minutest of details while recording the day-to-day financial transactions, whereas accountants use that record to conduct audits and forecast future needs for the business. The two careers are similar, with both accountants and bookkeepers working side by side, and require many of the same attributes and skills.
Bookkeeping Vs Accounting:
However, there are a few differences between bookkeeping and accounting. Some of the areas in which they differ are:
The decisions taken by management cannot be made on the basis of the data provided by bookkeeping.
However, management can make critical decisions for the business based on the data provided by accountants.
Bookkeeping is mainly concerned with keeping records of financial transactions in a systematic and proper manner.
The objective of accounting on the other hand is to study the financial situations and make informed decisions about the business keeping all the relevant information in mind.
Preparation of financial statements
The bookkeeping process does not prepare any financial statements; merely records the transactions.
Accountants help prepare the financial statements for a business.
The process of bookkeeping does not require professionals to have any particular skill set.
Accountants, however, need to have a special skill set because of accounting’s complex nature and its analytical process.
The Bureau of Labor Statistics (BLS) predicts a 5% reduction in jobs for bookkeeping clerks between 2021 and 2031.
For the upcoming several years, job growth and pay for accountants and auditors are anticipated to increase. The Bureau of Labor Statistics (BLS) forecasts a 6% increase in employment in this sector between 2021 and 2031.
The bookkeeping process does not require any analysis.
In accounting, the information provided by bookkeeping is used to analyze and interpret the data in order to compile it into a report format.
Bookkeeping has two types; single entry and double-entry bookkeeping.
The accounting department is concerned with two types of responsibilities which are the preparation of a company’s budget and palling of loan proposals.
Bookkeepers can start bookkeeping right after graduating from high school. They do however need to be accurate in what they do and have a certain grip on financial topics. The work they do is often overseen by an accountant.
Accountants need to have a certain experience and certification to start this job. With due experience, they can obtain the title of Certified Public Accountant (CPA).
What does a bookkeeper do?
Anytime a business spends or earns money, those financial transactions need to be organized and classified. This whole process is called bookkeeping. It involves tracking the revenue, expenses, assets, and debts in your business on a daily, weekly, or monthly basis. This information gets turned into financial statements that allow you to make smart business decisions, secure loans, and process and file your taxes. Bookkeeping encompasses everything that is needed to record the financial activity of your business.
A bookkeeper is primarily responsible for keeping track of all the income and expenses and making sure that these transitions are accurately reflected in the business’s books. Some of the tasks a bookkeeper can help with are:
- Tracking down receipts from the employees
- Entering of data
- Categorization of transactions
- Reconciling bank statements
- Sending and following up on invoices
- Managing the accounts payable.
The time spent on doing the tasks listed above depends on the type of business and how it operates. It could either take a few hours, a week, or even months depending on the business. If you run a service-based company like a consultation firm, the bookkeeper might have to send out 2-3 invoices per month and make a handful of purchases apart from the recurring spending of rent and payroll. For such purposes, a remote or part-time bookkeeper could also easily manage the tasks.
The role of a bookkeeper does not change dramatically with the changing complexity of a business. The main responsibilities still remain the same i.e. to make sure that the financial transactions are accounted for and classified properly in the books.
What credentials does a bookkeeper need?
- If you’re considering a career in bookkeeping, you may be wondering what qualifications are necessary to succeed in the field.
- While there are no formal educational requirements to become a bookkeeper, having a strong foundation in math, computer skills, and organizational abilities is essential.
- Many bookkeepers choose to pursue certification through professional organizations like the American Institute of Professional Bookkeepers (AIPB).
- Becoming certified can demonstrate your knowledge and expertise in bookkeeping principles and make you a more attractive candidate to potential employers.
- Additionally, obtaining a degree in accounting, finance, or a related field can provide valuable skills and knowledge that can set you apart in the job market.
- Good communication skills and attention to detail are also important for bookkeepers, as they may work closely with clients or other professionals to manage financial records.
- On-the-job experience is also valuable for bookkeepers, as it can help you develop practical skills and better understand the needs of the businesses you work with.
- As the field of bookkeeping evolves with technology and changing business practices, ongoing education and training may also be necessary to stay up-to-date and competitive in the job market.
- Whether you choose to pursue certification, a degree, or on-the-job experience, having a strong foundation in bookkeeping principles and a passion for helping businesses manage their finances can help you succeed in this rewarding career.
- In summary, while there are no strict requirements for becoming a bookkeeper, having a combination of education, certification, and experience can provide valuable skills and knowledge to help you succeed in this dynamic field.
What does a bookkeeper charge?
When you’re looking to hire a bookkeeper, one of the first questions you might have is how much they charge for their services. The answer to this question can vary depending on a few factors, such as the bookkeeper’s level of expertise and the local market charges.
Services: When hiring a bookkeeper, it’s essential to find someone with the right skills and expertise to meet your business’s needs. A bookkeeper with experience in your industry or with specific accounting software can provide valuable insights and help you manage your finances more efficiently. Ultimately, finding a bookkeeper who can offer the right level of service at a fair price is crucial for your business’s success.
Expertise: When hiring a bookkeeper, it’s important to consider their level of expertise. Bookkeepers with specific skills and experience in your industry or accounting software can provide valuable insights and help you manage your finances more efficiently. It’s also essential to work with a bookkeeper who is knowledgeable about tax laws and regulations, as this can help you avoid costly mistakes.
Local Market: It’s important to note that the cost of a bookkeeper can vary depending on your location. Bookkeepers in urban areas may charge more for their services than those in rural areas due to differences in living expenses and local market demands. It’s essential to research the local market charges to ensure that you’re paying a fair price for the bookkeeping services you require.
Advantages of a Bookkeeper
As a business owner, you have a lot on your plate. You’re busy managing employees, handling customer complaints, and trying to grow your business. With so much going on, it’s easy for your financial records to get disorganized. That’s where a bookkeeper can help. Here are some advantages of working with a bookkeeper:
Organizational Services: One of the primary advantages of working with a bookkeeper is the organizational services they provide. A bookkeeper can help you keep track of all your financial records, from receipts to bank statements. By organizing your financial records, a bookkeeper can help you make informed decisions about your business’s finances. Additionally, a bookkeeper can help you identify areas where you can cut costs and save money.
Lower Cost: Hiring a bookkeeper can actually save you money in the long run. By keeping your financial records organized and up-to-date, you can avoid costly mistakes such as missed payments or inaccurate tax returns. Additionally, a bookkeeper can help you identify tax deductions and other cost-saving opportunities that you may have overlooked.
Direct Assessments: Finally, working with a bookkeeper allows you to receive direct assessments of your business’s financial health. A bookkeeper can provide you with detailed reports and financial statements that show you exactly where your money is going. By understanding your business’s financial health, you can make informed decisions about future investments and growth opportunities.
What does an accountant do?
An accountant is concerned with analyzing the financial data recorded by bookkeepers and providing business owners with financial advice and insight based on that information. Some tasks accountants handle are:
Help with the start-up
If you are just getting into the business of accounting and do not have any prior experience or much information, you will need to know a little bit about accounting.
Accountants can provide you with an expert opinion and strategies on finances. They can help you formulate business plans and instruct you on how to manage the business’s finances from the very start. If you start missing information and making mistakes early on in your business, you will have a lot of catching up to do later on, and it is going to cost you a lot.
The decision of the business’s legal structure
You can structure your business in a variety of different ways. There are a number of options for you to choose from; be it a partnership, sole proprietorship, organization, corporation, or LLC. It is your choice to decide which option seems most suitable to you. Accountants can help with the consideration of all options which concern legal structures and help you choose the best option for your business after considering all the pros and cons.
Help with taxes
Business owners are often not aware of the filing practices and do not even have the time to file taxes. Accountants can make sure that a business is paying the right taxes for the particular industry and business type. It’s one of the ways to ensure that your business is not fined with any undue penalties. Accountants are useful for steering clear tax returns, and tax implications and can help claim tax credits.
Reviewing company finances
Accountants keep track of any money that you either owe to somebody or are owed by others. They make sure that the cash flows in steadily, with knowledge about what to do with that money, and ensure that the business is running smoothly. Accountants can also help in identifying the areas where revenue is coming from, and where the expenses are made so the profit can be sustained.
Which one do you require?
You should have a good concept of the professionals who will serve your company’s needs as a business leader. Therefore, it’s critical to understand if you require a bookkeeper or an accountant to manage your finances.
That could be challenging because the jobs and responsibilities might overlap. So, to assist you in making a decision, here are a few suggestions.
You might think about hiring a bookkeeper:
- for keeping track of daily transactions
- if you have a simple business structure and few inventories
- to cover a reasonable pay budget (bookkeepers make less than accountants)
Hiring an accountant:
- To facilitate tracking and logging complex transactions
- If your inventory is larger
- If you have the extra money
Accounting provides significantly more opportunities for salary growth and upward mobility over the long term. Although more schooling is needed to compete in the field, the potential payout is bigger overall.
If you are interested in the profession but not totally committed and want to test the waters, bookkeeping is a fantastic place to start. If you want a nice job with a reasonable income and decent security but aren’t necessarily seeking a long-term career, you might make an excellent candidate for bookkeeping.
Entry requirements are substantially lower for bookkeeping, and there is less strong rivalry for jobs.
What credentials does an accountant need?
It’s important to know the credentials that are required to become an accountant. Accountants are professionals who manage financial records and provide advice on financial matters. Here are the key credentials you need to become an accountant:
Education: To become an accountant, you need to earn a bachelor’s degree in accounting or a related field. A degree in accounting teaches you the principles of accounting, including financial reporting, taxation, auditing, and cost accounting. You may also need to obtain a master’s degree in accounting to qualify for specific accounting positions.
Certifications: Many accountants pursue certifications to demonstrate their expertise and knowledge in the field. Some of the most popular certifications for accountants include Certified Public Accountant (CPA), Certified Management Accountant (CMA), and Chartered Financial Analyst (CFA). Each certification has its own set of requirements, such as passing an exam or obtaining a certain amount of work experience.
Experience: Experience is an important credential for accountants. Many accounting positions require applicants to have at least 2-3 years of work experience. During this time, accountants learn how to apply accounting principles to real-world situations, develop their communication and analytical skills, and gain valuable experience working with clients and colleagues.
What does an accountant charge?
Have you ever wondered how much an accountant charges for their services? Let’s take a look at what the U.S. Bureau of Labor Statistics has to say about it. Understanding the costs associated with accounting services can be helpful whether you’re a business owner or an individual looking to file your taxes.
According to the U.S. Bureau of Labor Statistics, the median annual salary for accountants and auditors was $73,560 as of May 2020. However, it’s important to note that this figure represents the salaries of employed accountants and may not accurately reflect the fees charged by independent accountants for their services.
The fees charged by accountants can vary depending on factors such as location, experience, and the complexity of the work. Some accountants charge hourly rates, which can range from $100 to $500 per hour. Others may charge flat fees for specific services, such as tax preparation, which can range from $300 to $1,000 or more. When choosing an accountant, it’s important to consider not only the cost but also their experience and expertise, which can save you money in the long run.
Why My Count Solutions?
My Count Solutions is handled by talented accountants, bookkeepers, and CPAs that provide an affordable service for managing your business. It also provides financial consultation, as well as helps in running your business smoothly without having to stress about taxes. It provides you with the option of remote bookkeeping and also provides tax preparation services, audit representation services, and payroll services, making the accounting process easy and efficient for any business.
Bookkeepers and accountants help in keeping the records organized and making the best of those records by using them to make better decisions for the company. They are very essential parts of the same coin, i.e. a business.