Many people are hard-pressed to describe the difference between an accountant and a bookkeeper. Even though both these professionals share common goals, they will support a business in different stages of the financial cycle. In fact, bookkeeping is more of an administrative job that records financial transactions. Accounting, on the other hand, is more subjective and gives the business financial insights based on the information received by the bookkeeper.
Bookkeeping
A bookkeeper will record daily financial transactions of a business consistently. Companies such as Bould Bookkeeping can help with this. Bookkeeping is one of the key components of creating a financially-sound business. Here are some of the most important tasks of a bookkeeper:
. Recording all the financial transactions of the business;
. Posting debits and credits;
. Balancing and maintaining general ledgers, subsidiaries, and historical accounts;
. Producing invoices;
. Payroll completion.
Maintaining a general ledger is an important part of bookkeeping. This is a basic document where the bookkeeper will record the amounts from expense receipts and sales. The process is known as posting. In fact, the more sales the business has, the more often the ledger is posted. A general ledger can be created with a lined sheet of paper, a computer spreadsheet, or specialised software.
The size of the business and the number of transactions completed daily will determine the complexity of a bookkeeping system. All the sales and purchases made by a business need to be recorded in the general ledger. Some of these transactions need to have supporting documents. The IRS highlights which financial transactions require supporting documents on their website.
Accounting
Accounting is a high-level financial process that relies on the information provided by the bookkeeper. Accountants will produce financial models using this important information. In fact, the process of accounting is more subjective when compared to bookkeeping. Accounting consists of:
. Preparing company financial statements;
. Preparing adjusting entries – recording the expenses of a business that aren’t still recorded in the bookkeeping process;
. Completing tax returns;
. Analysing the costs of business operations;
. Helping the business owner understand the impact of his or her financial decisions.
An accountant will provide reports that group key financial indicators together to the owners of the business. That way the owner of the business will have a better understanding of the cash flow situation and the actual profitability of the business. The accountant will transform the information from the general ledger into financial statements that will help reveal the bigger picture of the business. It shows whether the company is progressing on the right path. Accountants will also help with strategic tax planning, tax filing, and financial forecasting.
The Role of the Bookkeeper vs The Role of The Accountant
Most of the time, a bookkeeper and accountant may perform the same work. The bookkeeper’s primary task is to record all financial transactions of your business and keep it financial organised. An accountant will provide financial analysis, consultation, and advise on tax issues.
Credentials of a Bookkeeper
Bookkeepers need to be highly accurate to be successful in their job. They should be knowledgeable about important financial topics. The work of the bookkeeper is supervised either by an accountant or a small business owner. A bookkeeper cannot call themselves an accountant.
Credentials of an Accountant
One should have a bachelor’s degree in accounting to qualify as an accountant. On the other hand, finance degrees are also considered as adequate substitutes to an accounting degree.
Accountants can acquire additional certifications such as a Certified Public Accountant (CPA). To become a Certified Public Accountant (CPA), the professional needs to pass the Uniform Certified Public Accountant examination and possess the relevant experience.
