Bookkeeping and accounting are often used interchangeably. Both are financial and are connected to many different tasks. For these reasons, many people confuse the two. There are significant differences in these two jobs.
Bookkeeping is focused on the recording of transactions while accounting focuses on interpreting and analyzing data for better business decisions.
University of Wisconsin Accounting professor D’Arcy Becker states it concisely by saying that “Bookkeeping is designed to generate data about the organization” while “Accounting turns data into information.”
Bookkeeping focuses on recording accurate business records and financial transactions including purchases, receipts, sales and payments. While it is a part of the accounting function in business, it has a more tactical, task-management focus. The main role of this position is to accurately record financial data daily, keeping a log of all transactions in the business’ books. Bookkeepers also balance the books using a trial balance. In both accounting and bookkeeping, reporting is important. Bookkeepers provide reports to business owners as well as to the business owners’ accountants.
An accountant works in the field of accountancy and focuses on financial information. Accountants analyze information and give business insights and counsel.
Accountants oversee business accounts as well as complete tax returns. They interpret data and provide advice about financial decisions. Accountants oversee activities of bookkeepers and will balance the books and review reporting to make sure it is aligned with accounting practices. Accountants provide financial statements and reports to business owners and leaders. Using data and information from reports and financial statements, accountants will make recommendations on costs as well as create systems to better track and monitor financial data. Business leaders get information and guidance from accountants to make informed business decisions.
An accountant’s analysis can provide information for forecasts, business trends and opportunities for growth. They can also advise on cash flow management and asset management.
Bookkeepers are typically required to have two or more years of experience. Educationally, they may have an Associate’s degree and may have additional certifications. Many bookkeepers get certifications in bookkeeping or accounting software (ex. QuickBooks certification). To be a bookkeeper, you need to have a high attention to detail and a desire for accuracy. Bookkeepers should stay up to date on financial topics as well understand business operations.
What is the difference between bookkeeping and accounting?
Accountants typically have a Bachelor’s degree in accounting or finance. They may have a Master’s degree as well. Accountants also can have additional professional designations such as a CPA (Certified Public Accountant), or CMA (Certified Management Accountant).
CPAs are licensed by the states they practice in. Their license allows them to perform attestations: that is, to tell third parties that a company’s books are fairly stated. They do this by performing audits or reviews.
EAs are Enrolled Agents. They are licensed by the U.S.Treasury Department and all are tax specialists.
Both CPAs and EAs can represent you in front of the Internal Revenue Service (IRS).
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