When many people think about accounting and bookkeeping, it could be harder for them to explain the differences between them. As the accountants and bookkeepers have common goals to do, they assist your business in distinct stages of the financial cycle.
Bookkeeping is transactional and administrative and is linked with recording financial transactions. Accounting is much more subjective and provides your businesses with insights that are based on the information for bookkeeping.
Here, we’ll elaborate on the differences between bookkeeping and accounting along with the differences between the roles of accountants and bookkeepers.
Bookkeeping and its functions
Bookkeeping is the process to record regular transactions in a consistent manner, also it’s a basic component to build a business that must be successful financially. It consists of:
- Credits and Debits Posting
- Financial Transactions Record keeping
- Processing invoices
- Completion of payroll
- Maintain and balance subsidiaries, historical accounts, and ledgers
One of the basic and main components of bookkeeping is to maintain a general ledger. It is a crucial document in which the bookkeeper records the amounts from expense receipts and amounts from sales. A ledger can get created by making use of specialized software, a spreadsheet, or more simply a lined paper sheet.
It depends upon the size of the business, the number of transactions to be completed on a daily, weekly, or monthly basis that how complex the system of bookkeeping will be. The sales and purchases that are made are required to be recorded in the ledger and some specific items require some supporting documents. The IRS has mentioned on their website about the business transactions that need supporting documents.
Accounting and it’s functioning
Accounting can be described as a process of superior- a level that makes use of financial information which is compiled by a bookkeeper or business owner and using the information he produces financial models.
Rather than bookkeeping, the process of accounting is more subjective that is largely transactional. Accounting consists of:
- Income tax returns completion
- Analysis of cost of operations
- Preparation of financial statements of the company
- Preparation of financial statements for the company
- Providing assistance to business entrepreneurs to know the influence of financial decisions
The accounting process gives a report that gets basic financial indicators together. The consequences are a better understanding of actual profitability and the awareness of cash flow in the business. The job of an accountant is to turn the data from the ledger to the statements that produce a clear and bigger picture of the business and it also gives the path to the company to progress. To get assistance for strategic tax planning, tax filing, and financial forecasting, business owners look for accountants.
The role of Accountant V/S Bookkeeper
Many of the times bookkeepers and accountants share the same work to do. However, in general, the prior task of the bookkeeper is to record the transactions and to keep you organized financially. On the other hand, the accountants give consultation and analysis, and they are much more qualified to provide you efficient and reliable advice on matters related to tax.
Credentials of Bookkeepers
There is not any formal education that a bookkeeper in Australia requires to possess. In order to be successful in work, they are required to be accurate and have maximum knowledge related to financial topics. Normally the work of a bookkeeper is overseen by either a small business owner or an accountant. Therefore, it is not wise to call a bookkeeper an “accountant”
Credentials of an Accountant
To hold the title of an accountant, an individual must possess a degree of bachelors in accounting. Sometimes, degrees in finance are considered as an adequate substitute in the case of those who don’t hold any specific degree in accounting.
The accountants in Melbourne are also eligible to acquire additional professional certifications. To exemplify, an accountant with sufficient education and experience can hold the title of CPA (Certified Public Accountant) that is the most common accounting designation.
Some of the business owners try to manage the finances of the business on their own; however, others prefer to seek professional services to concentrate on some parts of their business that they prefer.
For the long-term success of any business, the organized financial records along with efficiently balanced finances that are produced by a bookkeeper with smart financial strategy and accurate tax-filing done by the accountant are required. Whatsoever method you choose for your business, the ultimate goal is the progress of your business.