The difference between bookkeeping and accounting
Both bookkeeping and accounting are essential functions of all businesses.
But when it comes to bookkeeping and accounting – what exactly are the differences?
In basic terms, bookkeepers are responsible for the recording of financial transactions and accountants analyse, classify, report and summarise financial data. So what do their day-to-day jobs involve?
Bookkeeping is a fundamental ‘subset’ of accounting and is intrinsically the process of facilitating the day-to-day operations of a business via the accumulation and accessing of financial information.
One of a bookkeeper’s primary tasks is maintaining a general ledger, which is a document that records financial transactions (credits and debits). Ledgers can be created with specialised software or basic spreadsheet packages and the complexity of a bookkeeping system depends on the size of the business and the number of transactions that are recorded. Other components of a bookkeeper’s job can include producing invoices, maintaining historical accounts and managing the payroll.
Bookkeepers are required to have some qualifications, however relevant experience is also ideal. Although some financial software blurs the traditional lines between bookkeeping and accounting, most bookkeepers’ processes need to be overseen by an accountant or the company owner. Prospective employers tend to be smaller businesses in need of financial record keeping and annual salaries can be up to $74,700. Many bookkeepers also contract out their services to multiple clients.
Accounting provides reports that combine a business’s financial indicators and manipulate ledger information into statements that reveal the ‘bigger picture’ of how a business is performing financially.
Typical tasks include preparing financial statements, analysing the cost of operations, accruing or deferring expenses and revenue and assisting business owners and investors with strategic tax planning, financial forecasting and providing them with an understanding of the impact of their financial decisions, in terms of profitability and cash flow. Accountants may also design the nuances of the bookkeeping system, which allows them to detect and deter fraud, theft and embezzlement.
Accountants normally acquire specific accounting or finance qualifications and (unlike Bookkeepers) are eligible to gain additional professional certifications (therefore rewarding them with titles like ‘Chartered Accountant’ or ‘Certified Public Accountant’) and become members of major professional accounting bodies, like the Certified Practicing Accountants, the Institute of Chartered Accountants or the Institute of Public Accountants. They can have long-term commerce, industry or public sector careers and base-level senior accountants can earn up to $94,000 a year.
Investing (whether it be time or money) in a profitable future can profoundly influence the long-term success of a business, however whatever strategy is employed, both bookkeeping and accounting are important contributors. So if figures are your forte, consider a future in finance.