What Is the Difference Between Bookkeeping and Accounting?

What Is the Difference Between Bookkeeping and Accounting?

What Is the Difference Between Bookkeeping and Accounting?

Bookkeeping and accounting are two functions which are extremely   important for every business organization. In the simplest of terms, bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data.

Bookkeeping and accounting may appear to be the same profession to an untrained eye. This is because both accounting and bookkeeping deal with financial data, require basic accounting knowledge, and classify and generate reports using the financial transactions. At the same time, both these processes are inherently different and have their own sets of advantages. Read this article to understand the major differences between bookkeeping and accounting.



Bookkeeping vs Accounting - Major Differences

A major misconception regarding bookkeeping vs. accounting is that both are considered to be one profession. Though they seem to be very similar, there are some striking differences between the two. To resolve this confusion, we have listed down accounting vs bookkeeping differences here –

 

 

Bookkeeping

Accounting

Definition

Bookkeeping is mainly related to identifying, measuring, and recording, financial transactions.

Accounting is the process of summarizing, interpreting, and communicating financial transactions which were classified in the ledger account.

Decision Making

Management can't take a decision based on the data provided by bookkeeping.

Depending on the data provided by the accountants, the management can take critical business decisions.

Objective

The objective of bookkeeping is to keep the records of all financial transactions proper and systematic.

The objective of accounting is to gauge the financial situation and further communicate the information to the relevant authorities.

Preparation of Financial Statements

Financial statements are not prepared as a part of this process.

Financial statements are prepared during the accounting process.

Skills Required

Bookkeeping doesn't require any special skill sets.

Accounting requires special skills due to its analytical and complex nature.

Analysis

The process of bookkeeping does not require any analysis.

Accounting uses bookkeeping information to analyze and interpret the data and then compiles it into reports.

Types

Basically there are two types of bookkeeping - Single entry and double entry bookkeeping.

The accounting department does preparations of a company's budgets and plans loan proposals.

Bookkeepers and Accountants

Bookkeepers are required to be accurate in their work and knowledgeable about financial topics. Bookkeepers work is usually overseen by an accountant.

Accountants with sufficient experience and education can obtain the title of Certified Public Accountant (CPA).

 

What Is the Difference Between a Bookkeeper and an Accountant?




An accountant is in charge of assessing and interpreting the financial data of a company, and for reporting on it. An accountant has a higher skill set than a bookkeeper, whose primary responsibility is handling the actual recording of the company’s financial transactions.

An accountant usually has a degree or certification (CPA), and is paid better than a bookkeeper. Typically, a bookkeeper reports to the accountant.

A bookkeeper does not require any formal training, however a bookkeeper’s job is important. The information a bookkeeper is responsible for gathering and managing affects how an accountant will interpret the financial information of the company. Based on this information, the accountant provides recommendations to management or the company’s owners about spending, tax issues or other financial concerns.

What Are the Duties of a Bookkeeper?

The duties of a bookkeeper vary, depending on the company. Here is a breakdown of the responsibilities typically associated with a bookkeeping role:

     1. Recommend, implement or manage accounting software for the development of a single or           double entry system of accounting.

     2. Recommend, implement and monitor bookkeeping policies and procedures.

     3. Develop credit and debit accounts, including the assigning of expense categories.

    4. Enter expenses and income into the software, including non-digital methods of payment                such as cash and checks.

     5. Handle banking activities including new deposits.

What Are the Duties of an Accountant?

The duties of an accountant can be broken down into four areas:

1.   Data Management: Overseeing how data is stored, managed and updated. For instance, a bookkeeper might recommend the software for a double entry system of accounting, but the accountant would approve it.
2.   Financial Analysis and Consultation: Properly assessing data and advising management.
3.   Financial Reports: Being able to generate the standard business reports and statements required by businesses and the IRS.
4.   Regulatory compliance: Being up to date on government regulations and ensuring the company is following industry standards.



 
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