10 Mar Here’s All you Need to Know About Accounting and Bookkeeping
Accounting and Bookkeeping overlap to some extent as both deals with the financial aspect of a business. Both require basic accounting knowledge. Yet, they are different from each other.
We can say that Bookkeeping is the initial process of accounting that deals with the recording aspect. On the other hand, accounting deals with the overall financial cycle from analyzing to preparing financial results and decisions through the data collected by bookkeeping.
What is Accounting:
Accounting is a broad term used for recording, summarizing, analyzing, and consulting the finances of a company along with presenting reports and commentaries. A person who performs these activities is known as an Accountant.
It is the process of collecting raw data and preparing a coherent report that shows the financial status of your business.
It determines your cash flow, profit, assets, liabilities and provides you the right financial strategy to implement for boosting up your business revenue.
Duties of an Accountant:
An accountant evaluates the financial data and provides detailed business insight and advice to the business owners for taking future decisions. The duties of an accountant include:
- Recording and analyzing data
- Creating reports, making audits, and preparing reports of tax returns, balance sheet, and income statements
- Informing owners about forecasts, trends, and opportunities for growth
- Assisting business owners in making financial decisions
- Adjusting entries
What is Bookkeeping:
Bookkeeping is the practice of accurately recording the financial data of a business on a daily basis. It includes recording purchases, receipts, sales, payments, and all other transactions in a book.
A bookkeeper regularly maintains the cash flow of a business by recording every incoming and outgoing financial transaction that takes place.
Bookkeeping is consistent, easy to understand, and provides a roadmap for the accountant to analyze and make further decisions.
Duties of a Bookkeeper:
Bookkeeper duties involve:
- Maintaining General Ledger
- Recording all financial transactions
- Recording debits and credits
- Creating invoices
- Handling payrolls
- Managing and balancing ledgers, accounts, and subsidiaries
If you’re a business owner, you know the cost of the issues that may arise from audits, cash flow, late payments, errors, and tax penalties. Therefore, it is worth investing to hire a professional bookkeeper to secure your business from the additional charges.
Difference between Accounting and Bookkeeping:
Bookkeeping comes under the umbrella of accounting as it deals only with the recording and categorizing aspect. But accounting itself is the process of effectively using the financial data through analysis, strategy, and tax planning.
Anyone having the basic knowledge of accounting can perform the duties of a bookkeeper. But accounting is a professional field that needs professional expertise and a degree to be a certified accountant.
Accountants handle the entire accounting cycle while bookkeepers specifically work on recording financial transactions. Bookkeepers provide the groundwork data for accountants.
An accountant can perform the duties of bookkeeping. But a Bookkeeper cannot perform the duties of an accountant as it needs a professional degree and expertise to be a CPA (Certified Public Accountant).
Whether you hire a professional accountant or a bookkeeper, you should ensure that the person contains references, relevant expertise, certifications, and degrees to perform the task professionally.
If your business is growing and you’re unable to deal with the complex taxes and finances, you can seek help from our Certified Chartered Accountant.