When many individuals think about accounting and bookkeeping, they would be under pressure to explain the differences between every process. Although accountants and bookkeepers share common objectives, they help your company in different financial cycle phases.
Bookkeeping from firms such as Bould Bookkeeping is more administrative and transactional and involves recording financial transactions. On the other hand, accounting is more subjective and offers your business insights based on bookkeeping information.
The Function of Bookkeeping
Bookkeeping entails consistently recording daily transactions and is a crucial component for creating a financially sound business.
- Recording financial transactions;
- Posting credits and debits;
- Producing invoices;
- Balancing and maintaining general ledgers, historical accounts, and subsidiaries;
- Completing payroll.
Keeping a general ledger is among the key parts of bookkeeping. A general ledger is a document where a bookkeeper writes down the amounts from expense and sale receipts. This is called posting, and the more sales that are finished, the more the ledger will be posted. You can create a ledger with a computer spreadsheet, specialised software, or a sheet of paper.
How complicated the bookkeeping system is usually contingent on the size of the business and the number of transactions completed monthly, weekly, and daily. All purchases and sales that your business has made should be recorded in the ledger, while specific items will need supporting documents. The IRS stipulates the type of transactions that will need to have supporting documents on their site.
The Function of Accounting
Accounting is a high-level procedure that utilises financial data gathered by a business owner or bookkeeper and creates financial models using that data.
When compared to bookkeeping, which is mainly transactional, the accounting process is more subjective.
Accounting constitutes of:
- Composing adjusting entries (writing down expenses that have happened but haven’t been recorded in the bookkeeping procedure);
- Compiling company financial statements;
- Analysing operation costs;
- Finishing income tax returns;
- Helping the business owner understand the effect of financial decisions.
The accounting process offers reports that bring together key financial indicators. The result is an improved understanding of the awareness and actual profitability of the business’ cash flow. Accounting converts the data acquired from the ledger into statements that show the business’s bigger picture and the direction the business is heading on. Business owners will look to accountants for assistance with tax filing, financial forecasting, and strategic tax planning.
The Accountant Role vs the Bookkeeper Role
There are times when accountants and bookkeepers perform the same job. But generally speaking, the first task of a bookkeeper is recording transactions and keeping your financials organised. At the same time, accountants offer analysis and consultation and are more adept at tax issues.
Bookkeepers don’t need to have any formal education. To succeed in the work they do, bookkeepers need to be knowledgeable when it comes to critical financial topics and be sticklers for accuracy. The bookkeeper’s work is often managed by an accountant or the business owner whose books they are working on. Therefore, a bookkeeper can’t refer themselves to be an ‘accountant.’
To be deemed an accountant, a person will need to acquire a bachelor’s degree in the field. Those who don’t have a degree in accounting can use finance degrees, which are adequate replacements.
Unlike bookkeepers, accountants are eligible to get additional professional certifications. For instance, accountants with enough experience and the right level of education can acquire the title of a Certified Public Accountant, which is among the most common accounting designation. To become a fully-fledged CPA, you must pass the Uniform Certified Public Accountant exam and have experience as a certified accountant.