• Pamela - BAM Vic

Bookkeeping vs. Accounting: Differences and When to Use Each One

Updated: Sep 19, 2019

Pamela found this helpful article written by Billie Anne Grigg on Google.

Bookkeeping is managing the day-to-day financial transactions of the business—updating spreadsheets, reconciling bank statements, and processing payroll. Accounting is more about financial supervision: Taking the documents prepared by bookkeepers and using them to think strategically about the company’s financial health and growth.

Many small business owners aren’t sure about the difference between bookkeeping vs. accounting. But it’s an important distinction as knowing the difference can help you hire the right professionals to advise you in your business. It can also help you know what to expect from each relationship.

The Basics

Many people use the words business accounting and bookkeeping interchangeably. There’s a good reason for this. Bookkeepers and accountants generally work together very closely in order to fully serve their clients. Both are tasked with the financial reporting and well-being of the business. And both generally don’t get much time off between the months of January and April.

There are some key differences between business bookkeeping vs. accounting, though those differences are becoming increasingly blurred. Advancing technology and shifting mindsets in both professions are causing many bookkeepers to take on roles more traditionally managed by accountants. Similarly, many accountants are branching off into different areas of focus to help their clients manage their entire financial situation more effectively.

Bookkeeper vs. Accountant vs. CPA: What Does Each Do?

Traditionally, bookkeepers have managed the day-to-day financial transactions in a business. They have been in charge of recording transactions in the accounting software, reconciling bank statements at the end of the month, and producing preliminary financial statements on a monthly basis. Bookkeepers have also often provided full back-office support, including invoicing clients, paying bills, and processing payroll.

A skilled bookkeeper should have at least two to four years of experience or an associate’s degree in accounting. Other tasks usually performed by a bookkeeper include:

Advising clients on record-keeping requirements and methods, Cash flow forecasting and management, General record keeping

Accountants have traditionally taken more of an advisory role with business owners. In addition to preparing the financial statements and reports that are required by banks and governmental agencies, accountants provide monthly or quarterly insight into the health of the business. Using the financial statements prepared by the bookkeeper, accountants work on strategic planning with their clients, providing valuable insight into strategies that could help business owners grow their companies.

Certified public accountants (CPAs) are accountants regulated by their state board of accountancy. They must meet minimum educational and experience requirements and complete ongoing annual continuing education to stay on top of new laws and regulations.

Other tasks performed by accountants and CPAs include:

Verifying the accuracy and completeness of the accounting records, Income tax planning, Advice on tax laws.

#Bookkeeping #Accounting #Business #Payroll #CPA #Accountants #Cashflow

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