Bookkeepers and Accountants work in the same field and deal with the same set of information. They have the same goals while working for a company and support it at different levels. In simple terms, bookkeeping is more of administrative work, while accounting is more of an analysis and subjective work.
Nowadays, almost every business needs a bookkeeper and accountant. The need for an accountant is not much in small companies, but it is a must when it comes to the bigger ones. On the other hand, bookkeepers are mandatory in every business, whether they are big or small.
Sometimes people use the terms bookkeeping and accounting interchangeably, but as a business owner, you must know better. While bookkeeping is an essential part of accounting, accounting is broader.
In this blog post, let\’s find out how you can differentiate between the two.
Also Read: What Is Virtual Bookkeeping
What Is Bookkeeping?
Bookkeeping is the act of recording daily transactions and keeping them together for accounting purposes. Further, it is the backbone of accounting as it keeps all the details of your financial expenses and profits consistently.
Bookkeeping allows a business to record financial transactions, post debits and credits, create invoices, prepare financial statements like a Balance Sheet, Cash Flow, and Income Statements.
The main component of bookkeeping is the general ledger which is the hardcopy that bookkeepers record all sales and receipts. Furthermore, it also helps maintain subsidiaries, ledgers, and past accounts. Bookkeeping also involves recording payroll transactions, employee expenses, maintaining inventory, paying bills, etc.
Moreover, there could be several layers of complexity in this seemingly looking bookkeeping system. Depending upon the size of the business, bookkeepers have to always be on top of their game.
Also Read: Top 7 Ideas For Small Businesses To Save Money In 2021
How Are Accountants Different From Bookkeepers?
Unlike bookkeepers, accountants have to be professionally certified in this field as it requires a lot of analytical skills. They have to record, consult, report, analyze and summarize all the financials in the database.
Bookkeeping is administrative in nature and there are not any formal educational requirements to become a bookkeeper, but a bookkeeper must be knowledgeable about financial terms and strive for accuracy. However in accounting, you need to hire experienced people who have sharp analytical skills and are excellent with numbers.
Accounting is important in determining a company\’s or businesses\’ financial position, annual profit and loss, and expenses surpassing the budget. Furthermore, an accountant compiles and maintains all the financial records, cash flow, and balance sheets to find a way forward.
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Credential Difference Between Accountants And Bookkeepers
As mentioned before, the role of bookkeepers is of administrative nature while that of accountants is analytical. Thus, it is evident that they will need different training and skill set, especially for an accountant.
- Bookkeepers: They do not need formal training as such for bookkeeping. However, they need an eye for detail, chase accuracy, and a piece of overall knowledge about financial topics. They are not at the forefront of accounting and managing finances but have to report to an accountant if the business has one.
- Accountants: To become an accountant, one has to complete their bachelor\’s degree in accounting or finance. Moreover, they can freely obtain other certifications for their expertise and experience, like a CPA or Certified Public Accountant.
However, in order to get the CPA, the accountant must clear the Uniform Certified Public Accountant exam and have enough experience as a professional.
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Can Bookkeepers Become Accountants?
Yes, Bookkeepers can have a career in accounting by getting a bachelor’s degree and attaining the CPA. But without formal training and professional experience, a bookkeeper cannot become an accountant and give their inputs in the business.
Many small businesses hire expert bookkeepers who function as accountants, but that is rarely productive or helpful. So, one cannot directly jump from a role of bookkeeping to accounting without the necessary training.
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Conclusion
Both bookkeeping and accounting helps in the growth and structure of your company. To decide if you want to hire a bookkeeper or an accountant for your business, you can ask yourself a few questions.
Some of them are:
- What industry is your business in?
- How big is your company?
- What is the size of your inventory and the number of employees in your organization?
Furthermore, you can outsource to an accounting firm like Professional Accounting Solutions, Inc, which offers online bookkeeping services and accounting services. Our focus is to provide clients with accurate and timely financial statements to assist them in making the right financial decisions.
by PasFirm