Accounting and bookkeeping are sometimes used interchangeably in the business environment; however, they are not the same thing. Although bookkeepers sometimes perform some of the duties of accountants and vice versa, they in no way serve the same purpose, require the same expertise, or accomplish the same tasks and goals. Both accounting and bookkeeping are essential business processes which must be performed in the effective and efficient operation of any business. This paper will discuss the various similarities and more importantly the very distinct difference between the two functions.
Often when two functions overlap or intertwine, they can often be confused for one another. This is truly the case with bookkeeping and accounting. Although some of the functions work hand in hand or may overlap to a certain degree, these two functions serve different purposes within a business. Bookkeeping is essentially the recording of data for a business. A bookkeeper typically records all transactions which occur within a company. This includes all debits and credits that would come in or go out of a company. This also includes all correcting entries and the maintenance of such data. A bookkeeper is exactly what the name entails, which is a keeper of the books. This includes a lot of data entry, as this is their primary duty. Sometimes a bookkeeper is also in charge of payroll or various expenditures and procurement of services and goods. Depending on the size of the company as well as the company’s needs and staffing possibilities, the range of duties of the bookkeeper will either grow or shrink.
The skills needed for bookkeeping are typically general knowledge of financial principles, and strong attention to detail. “The bookkeeper’s work will often fall under the oversight of either an accountant or the owner of a small business” (Brown, 2006). The expertise needed to be a bookkeeper is often experience in bookkeeping or an Associates, Certificate, or Bachelor’s degree in Bookkeeping. Several certificate programs are available in bookkeeping as this career choice is often seen as lower in terms of compensation and expertise than an accountant. Because of this, it is often seen as being easier to follow this career choice than it is to be an Accountant as well. Although this mentality exists that bookkeeping is lower than accounting, bookkeeping is still a very critical process to conducting business. Without the recording and maintenance of the transactions and data, business cannot be conducted adequately and efficiently. Bookkeepers can attain National certification as well. This adds value to them and allows for better pay. Although certification is available, it is not often mandatory to obtain a job within a bookkeeping department. General bookkeeping tasks include issuing invoices, recording financial transactions, paying suppliers, recording inventory, processing cash transactions, and processing payroll. Accounting utilizes the data from bookkeeping to successfully complete accounting tasks.
Accounting encompasses analyzing, verifying and reporting the recorded financial information that is provided by a bookkeeper. Accountants often design the bookkeeping system, create the financial and reporting controls to ensure the system is working well, and analyze and quantify the financial effects of all activities. Accountants implement internal controls that are used to detect and prevent theft, fraud, embezzlement, and other dishonest behaviors. Accountants also prepare reports which are based on the gathered information to create critical reports such as financial statements, tax returns, and various internal forecasting reports for managers. The accountant also determines the measurement to be used in determining sales revenue and expenses to determine the profits or losses for the periods needed.
Accountants tend to make more money than bookkeepers because they analyze and report to upper managers, whereas, bookkeepers are often more utilized in data entry and tasks directly related to the individual transactions. Accounting is broader than bookkeeping in that there is more detail needed as well as higher analyzation and decision making. Accountants are often the second set of eyes on any transaction to ensure there are not any discrepancies. Accountants can attain Associates, Bachelors, Masters, and Doctorate degrees in Accounting. Certified Public Accountants can also often go into business for themselves and work with multiple companies in the oversight of the company’s financial health. Although a company may hire a contract bookkeeper, they are less likely to ask their bookkeeper for advice than they are to ask their accountant.
Accountants generally have more financial knowledge than bookkeepers and their salaries adequately reflect this. Both bookkeeping and accounting deal with finances. They both also record transactions to an extent. A bookkeeper is typically at the front end of a transaction and an accountant is typically at the back end. Accountants have such a broad knowledge of the entire financial health of a company, that they can do a complete overhaul and redesign of the bookkeeping system. Bookkeepers cannot typically accomplish this. Bookkeepers, depending on the size of the company, can do many transactions and even corrections. They have an overview of the financial health of a company and are highly responsible for the day to day operation of a company. An accountant has a greater understanding of the company’s health and can perform the duties of a bookkeeper as well. Although accountants can do all the tasks of a bookkeeper, they typically refrain from menial tasks as they are more needed at a broader scope and overhead capacity. They often delegate smaller tasks to bookkeepers.
Accountants are often seen as being in the capacity to manipulate data; whereas, a bookkeeper typically is not. This is again because accountants typically have a higher authority and management say than bookkeepers do. Accountants often have the authority to change entire systems based on their expertise and data analyzations in what is best for the company (Angonese & Lavarda, 2017). Accounting have many processes, terms, ideas, rules, and regulations associated with its function. Bookkeeping is not held to as high a standard. With this being said, an individual that enjoys working with finance and mathematical equations, but does not want responsibility or high accountability would be better off becoming a bookkeeper than an accountant. Accountants make the news as being held liable for data or reporting manipulations; whereas, bookkeepers do not. Becoming an accountant takes more work and dedication than becoming a bookkeeper.
Typically, people think about bookkeeping and accounting as being interchangeable using the same skills and processes. Although bookkeeping and accounting have common goals, they each comprise a different step of the financial cycle. Bookkeeping is the method of recording individual transactions in a consistent technique, and is a key factor to building a financially effective business. The difficulty of a bookkeeping system often depends on the size of a business and the number of transactions that are completed regularly. Accounting is a process that uses financial information collected and entered by a bookkeeper or business owner, and in turn produces financial reports and models with that information. The process of accounting is more personal than bookkeeping, which is mainly transactional. The result of adequate accounting is a better understanding of the profitability of a company and its products and services, as well as an awareness of all cash flow within the business. Accounting transforms the data from the ledger into reports that show the bigger picture of the business overall, and the direction the company is going. Concise and properly balanced financial records produced by the bookkeeper along with with smart financial strategies and sound guidance from the accountant directly contribute to the long-term success of any business.
- Angonese, R., & Carlos Eduardo Facin Lavarda. (2017). factors for the implementation of change in management accounting systems. Enfoque : Reflexão Contábil, 36(1), 139-154. doi:10.4025/enfoque.v36i1.30479
- Brown, B. (2006). What is The Difference Between a Bookkeeper and an Accountant. KYB Virtual Accountants. Retrieved from http://blog.keepingyourbalance.com/what-is-the-difference-between-a-bookkeeper-and-an-accountant