People with little knowledge about bookkeeping and accounting may find both the same, but both aspects are very distinct for those who have enough knowledge about these two terms. In today’s blog, we’ll discuss the difference between accounting and bookkeeping. Let’s get started:
What is Bookkeeping?
Bookkeeping is the process of recording and managing the financial transactions of a company. These financial transactions need to be recorded daily to make sure that records are up-to-date and accurate. Usually, it involves keeping a record of all financial transactions, such as sales, purchases, and payments for a business. Bookkeepers for small businesses are responsible for ensuring all records are up-to-date and maintained in an organised way. Bookkeeping consists of:
- Debits and credits posting
- Processing invoices
- Payroll completion
- Maintaining records of financial transactions
- Maintain historical accounts and ledgers
- Bank reconciliation
A professional bookkeeper keeps a closer look at your account. In order to help the business owner react swiftly to changes in their finances, markets, staffing, compliance requirements, and other business possibilities or dangers, they can provide timely information and pertinent management reports.
An accountant can be entrusted with creating the annual tax statements and reports once the annual accounting period has ended and the ledger accounts have been closed to produce a trial balance.
What is Accounting?
Basically, accounting involves the measuring, communicating, and processing of information about economic entities like corporations and businesses. This information can be categorised as non-financial and financial and it helps in measuring the economic activities of a company. This information can be passed to tax authorities, creditors, investors, management and other stakeholders. Accounting consists of:
- Complete income tax returns
- Cost of operations analysis
- Financial statements preparation of the company
- Helping business owners understand the impact of financial decisions on the company
The record-keeping of financial transactions from bookkeepers creates the foundation upon which the functionality of the accountant is based. That’s why it is vital that bookkeeping tasks need to be performed accurately. Accounting is a vital aspect of running a business smoothly. It makes it easier to keep track of ongoing business activities, which is crucial for future planning and strategy as well as financial reporting to stakeholders and tax authorities. Accountants’ reports are frequently used as the foundation for management decisions.
Key Differences Between Accounting and Bookkeeping
Accounting and bookkeeping both are different with different functions. Thus, it is important to understand the difference between bookkeeping and accounting. Here are a few points that will help you know the differences between these two roles:
- Overall role: Bookkeeping is the process of maintaining and organising financial transactions while accounting is all about analysing the financial condition and passing the information to the relevant parties.
- Duties: Bookkeepers are required to ensure the financial data is accurate and up-to-date, while accountants are responsible for monitoring the financial situation of the company.
- Information covered: Typically, bookkeepers don’t prepare management and financial information, but accountants assess and interpret data to generate reports and statements that are important for making decisions.
- Skills required: Bookkeepers need to understand the processes of bookkeeping and keep a closer look at every detail. On the other hand, accountants must be well-qualified and aware of complex accounting matters and apply that knowledge in the right way.
- Education: Bookkeepers need to complete a certified course. Meanwhile, accountants must have a Bachelor’s degree in accounting, given by a well-known institution like a university.
The extent and intricacy of the labour are the deciding factors when comparing bookkeeper and accountant differences. Essentially, bookkeeping is the foundation upon which all other aspects of accounting are built. Accountants lack the information they use to create reports and statements that describe the financial health of a business in the absence of an accurate, current record of business transactions. Furthermore, make sure you have a professional accountant and bookkeeper for your company.
The blog shares key differences between bookkeeping and accounting services. Both aspects play an important role in business. Without these services, business owners may feel overwhelmed. Therefore, if you want these solutions for your company, you can contact Reliable Melbourne Accountants.
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