What Is The Difference Between Bookkeeping And Accounting
Working in a company's financial department is always confusing. Some people can call you a bookkeeper while some will say you are an accountant. The big question “what is the difference between a bookkeeper and an accountant”. There has been plenty of confusion in the business world about the difference between the two.
It comes down to the size of the organization hiring them and of course the purpose that each serves for their respective clients or employers. In this informative post, we will explain both bookkeeping and accounting one by one.
1) Bookkeeping
It is the process of recording the financial transactions of a company systematically in order to show how these transactions relate to each other. Bookkeeping services are a part of accounting services and involves performing one or even all the eight steps involves in the bookkeeping cycle:
· Transactions
· Journal Entries
· Posting
· Trial Balance
· Worksheet
· Adjusting Journal Entries
· Financial Statements
· Closing The Books
Bookkeeping records everything right from recording financial events such as purchase of supplies, sale of a product, return of a product, etc., to posting in appropriate journals like accounts payable and account receivable to preparing financial statements such as balance sheets, profit and loss account, income statements, etc., to closing the books at the end of each accounting cycle.
Bookkeeping mainly focuses on data entry as well as the ongoing maintenance of your business records. Also it is ultimately responsible for the reliability of the Business data that is used by Professional accountants. In the past, records were kept in books so the name bookkeeping. But, today, bookkeeping is performed but the names of the book like journal, cash book or day book are still used in businesses. The primary function of a bookkeeper is recording transactions in the journal plus posting to the ledger.
Types of bookkeeping:
There are mainly two types of bookkeeping-
1) Single Entry
2) Double Entry.
In the first type of bookkeeping, the records of each transaction in a company is carried to the debit or credit column of a single account. On the other hand, two entries of each transaction are carried to the ledger in double entry bookkeeping- one to the debit side and one to the credit side of the corresponding business account.
2. Accounting
It is the systematic way of recording, reporting as well as analysis of a company's business transactions. As we know that bookkeeping involves making a company financial transactions, so the role of bookkeeping is encompassed within the accounting scope and the bookkeeping system used by businesses would form part of the accounting system.
Accounting is broader than bookkeeping
The primary job of a professional accountant is to prepare reports based on the data or information gathered by the bookkeeping process. They are also responsible for preparing all of the different tax return documentation for people and businesses. For example- income tax return, payroll tax return, etc. Apart from this, accountants can help businesses in public and private ltd company registration, GST registration, etc. Accounting is less mechanical and involves setting up a bookkeeping system, regularly monitoring it and interpreting the outcomes.
Accountancy is related to accounting and a professional accountant is the person who does it and is responsible for the work. Business accountants specialize in many areas of accounting like auditing, management and taxes. The way a business enterprise handles its finances depends on how big or small it is and both ways have their benefits and disadvantages.
If you are running a bigger company, then you will have a whole department devoted to accounting. If you have a small firm, then all the bookkeeping and accounting related work will be done by a single or couple of persons. In this situation, that person will be referred to as an accountant.
Remember, bookkeepers have lesser responsibility in comparison to accountants. Their tasks are more on recording basic transactions. Some bookkeepers are competent in areas like computation of tax payable for small business enterprises depending on their experience and expertise.
Conclusion
Accountant is a management member of a business whereas a bookkeeper is a staff member of an accounting team in a company. This is the reason that accountants paid more in terms of remuneration. A company contracts an ecommerce accounting services firm to set up their financial system, then hire a bookkeeper to maintain records that are later fed back to and used by accountants to create reports which are used for business operations.
