Bookkeeping and accounting share a primary objective – to keep the financial status of a business at an optimal level. Sometimes, the tasks involved in these two fields overlap. Since both deal with financial data and generating reports, the processes may appear similar to the untrained eye. Hence, some people confuse the two as the same profession.
To understand the differences of bookkeeping and accounting, we will look at several key factors that differentiate the two.
Functions of Bookkeeping and Accounting
Bookkeeping is the process of consistently identifying, recording, and measuring daily financial transactions. Bookkeeping tasks include:
- Recording financial transactions
- Balancing and verifying ledgers and accounts
- Posting debits and credits
- Managing accounts payable and receivable
- Producing invoices
- Completing the payroll
- Maintaining records and creating back-ups as necessary
- Assisting with audits
Accounting is the process of summarizing, analyzing, interpreting, and communicating financial information presented in the ledger account. Accounting tasks include:
- Managing data and overseeing how it is stored, managed and updated.
- Assessing data and advising management on the impact of financial decisions
- Generating financial reports and statements
- Ensuring that the company is following industry standards
Main Objectives of Bookkeeping and Accounting
The primary objectives of bookkeeping are to record all financial transactions and ensure that all these records are proper and systematic. The objectives of accounting are to measure and assess the financial situation of the company, communicate the information to the management and offer advice so the company will understand the consequence of their financial decisions.
Financial Data Analysis and Decision Making
Since the process of bookkeeping does not involve data analysis, business owners don’t make decisions based solely on the data provided by bookkeepers. Both bookkeepers and accountants may be tasked in preparing financial reports; however, the analysis and interpretation of data provided by accountants can significantly help business owners make a wise financial choice.
Credentials and Required Skills of Bookkeepers and Accountants
Although most bookkeepers are bachelor’s degree holders, an associate degree holder may also qualify as a bookkeeper as long as they have basic accounting knowledge and skills. Bookkeepers don’t need special certifications to qualify for the profession. A bookkeeper is usually overseen by an accountant in medium-sized and large companies or by the business owner themselves in micro and small enterprises.
To be an accountant, one must finish a bachelor’s degree in accountancy. One must also obtain the Certified Public Accountant (CPA) designation by passing a CPA examination.
Conclusion
Bookkeeping and accounting support different stages in the financial cycle. Bookkeeping is the essential first step in the accounting process. By keeping track of the day to day financial transactions and ensuring that records are accurate, bookkeepers lay the foundation needed by accountants for the proper analysis and interpretation of the financial data.
Frequently Asked Questions
Can an accountant do bookkeeping?
Accountants are professionals highly trained in the accounting process; hence, they are capable of handling bookkeeping tasks. However, experienced accountants, especially CPA’s don’t handle bookkeeping tasks.
Should I hire an accountant to do both bookkeeping and accounting tasks for my business?
You may think that hiring an accountant to do both bookkeeping and accounting task for you will save you money. Unfortunately, certified public accountants usually charge a high rate. Having an accountant manage your books and ledgers, and do accounting work for you might cost you more than hiring an in house bookkeeper. If you want to save on bookkeeping costs, the best option for your business is outsourcing. With this, you get an experienced and professional bookkeeper to oversee your daily financial transactions for you at an affordable rate.
If you need professional advice about outsourced and virtual bookkeeping, ACT Bookkeeping Group is a team of experts dedicated to helping business owners like you deal with your bookkeeping needs. Set a free consultation with us today.
Can a Bookkeeper Work as An Accountant?
Relevant education and certification are needed to be an accountant. For a bookkeeper to work as an accountant, they need to have the appropriate degree and certification, and accounting related experience.
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6 Benefits of Outsourcing Bookkeeping Services
