Comparing and Contrasting Bookkeeping and Accounting

A bookkeeper is one who performs financial record-keeping. This individual keeps record and processes daily transactions and they are often hired by small and medium-sized businesses. Bookkeepers complete data entry, ensure accurate records are kept and oversee how money flows in and out a business on a daily basis.

As a business owner, it is crucial to have precise records of financial transactions and robust cash flow. One aspect of ensuring the best financial health for a business is knowing what tasks the owner can perform and which tasks can be outsourced. Bookkeeping and accounting is but one of these tasks.

What Exactly does Bookkeeping Entail?

Especially for larger organizations, there can be a number of bookkeepers each with their own specialized role. One bookkeeper may manage payroll while another manages accounts receivable and payable. To be able to keep track of transactions to ensure that any money coming in and out of the company is accounted for, bookkeepers require strong computer skills, especially with spreadsheet and bookkeeping software, a high attention to detail and discretion. Other tasks and responsibilities held by bookkeepers are posting debits and credits, performing bank reconciliations, drafting cash flow statements and preparing invoices.

How does Bookkeeping Differ from Accounting?

Unlike bookkeepers, accountants tend to work on a macro-level to oversee the finances of a company. Accounting involves more so the interpretation, analysis and summarization off financial transactions as opposed to identification and record-keeping. Accountants draft financial statements and they can propose budgets. They can speak to the financial costs of operations and how decisions can affect a company’s financial state. They are the source of insight for a company’s financial health and it is from the accounting department that management gathers information on the company’s finances to prioritize profitability. As accounting demands analysis and interpretation, accountants have typically obtained a post-secondary degree that a bookkeeper is not required to have. Accountants may also, or even be required to, obtain additional accounting certifications.

Although different, bookkeeping and accounting are closely related. Accountants oversee the entire accounting process while bookkeepers manage day-to-day transactions. Accountants can often advise bookkeepers and oversee their work. The record-keeping performed by bookkeepers can be taken by accountants and incorporated into their financial documentation, analysis and forecasting.

Best fit For You

Understanding the nuances between bookkeeping and accounting is important for business so they may make the decision best suited for their needs. For small business or those who are looking to operate on a trim budget, it may be worth looking into doing one’s own bookkeeping – or minimally a portion of it – and providing all record-keeping to one’s accountant for the heavy lifting.

For business whose needs are outgrowing their ability or time to perform their own bookkeeping, having a bookkeeper can be the best option. A bookkeeper who is well-trained and competent can save hours for a business owner and decrease the time spent by a business’ accountant if records are kept well, which would cut down on costs.  For more about Bookkeeping services, click here.

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