Bookkeeping vs. Accounting:
What’s the Difference?
The historical battle of Bookkeeping vs. Accounting! If you are not a bookkeeper or accountant by trade, you probably don’t spend your days thinking about how they are different from each other. You probably didn’t even know that there is a difference between the two.
That’s because most people think of bookkeeping and accounting as one in the same. It’s true that bookkeeping and accounting are often confused with each other because of their relation to financial reporting. But while these two are related, interdependent, and essential business functions, bookkeeping and accounting are distinct from one another, too. In this article, we explore bookkeeping vs. accounting, including the differences between the two, and how they overlap!
Overview of Bookkeeping
Not sure what bookkeeping is all about? Put simply, bookkeeping is defined as the process of recording day-to-day financial transactions in a consistent manner. A day in the life of a bookkeeper will look different depending on the size of the company they work for as well as what types of accounts they manage. But all bookkeepers work to make sure the financial data is accurately entered and processed.
On any given day, a bookkeeper can be found:
- Preparing income statements, balance sheets, cash flow statements, and statements of total recognized gains and losses
- Processing payroll
- Paying contractor and supplier invoices
- Monitoring debt
- Recording incoming cash
- Reconciling accounts
- Maintaining the annual budget
- Reporting issues as they arise
- Assisting accountants come tax season
Overview of Accounting
One of the biggest differences between accounting vs. bookkeeping is that accounting comes with a broader set of responsibilities and refers to the process of financial reporting. A primary goal of accounting is to provide key financial information to business owners, managers, and investors so they can make informed, strategic business decisions. To do this, accountants thoroughly analyze and interpret financial information to create advanced reports on how the business is performing.
Think of accountants like doctors—they look at symptoms (or financial information) and prescribe something so businesses can improve their financial health.
On any given day, an accountant can be found:
- Preparing and analyzing financial statements
- Analyzing operations costs
- Recording expenses that haven’t been recorded by the bookkeepers
- Completing income tax returns
- Supervising bookkeepers’ work to ensure that they accurately record and categorize transactions
- Helping business owners understand the financial health of their business
- Helping business owners make informed strategic business decisions
- Setting controls for detecting and preventing fraud or embezzlement of funds
Bookkeeping vs. Accounting is not a Battle for the Ages, they both have their place in your business. Bookkeeping is the first step to keeping things on track. All in all, bookkeeping is an important task for every business. Having a good bookkeeper touts many benefits like giving you peace of mind knowing your books are in top shape and helping you make better financial decisions for your business.
If you are needing a well established bookkeeper to help you get and stay on track with your income/expenses give Sarah Binger a call at Dreambuilder Bookkeeper today to see what she can do to help your business.