What is bookkeeping, and what is the difference between bookkeeping and accounting?
Posted on 27th April 2022 at 16:59
Bookkeeping is the ongoing process of recording the daily transactions of a business. While it is a subfield of accounting it does not deal directly with auditing, taxes and such accounting processes. The reports compiled by bookkeeping are the foundation on which accountants do their related jobs. That is the basic bookkeeping and accounting difference, though both roles do require knowledge of accounting basics and work with financial data to improve the financial position of a business.
What is bookkeeping?
Bookkeeping records day to day financial activities such as receipts and invoices, while handling data entry requirements, reconciling bank statements and sorting out supplier payments. Bookkeepers generate reports and financial statements that are necessary for analysis that help businesses, including small businesses to make informed decisions for future growth and success.
Importance of bookkeeping
Bookkeeping helps a small business owner, corporates and public sectors to keep on top of their finances by recording financial transactions. With the relevant data on hand and by analysing and understand this data it saves business owners time and allows them to adjust strategies according to cash flow predictions to balance profit and loss. Data provided by bookkeepers helps accountants make strategic requirements to the business, for improvements.
What is Accounting?
You need accountants to give you more input regarding your financial data and provide you with strategic advice. Accounting plays a vital role in running your business as it tracks your income and expenditures. It also ensures that your business meets statutory compliance and provides quantitative financial information. It plays a pivotal role by providing your business with future projections and budgeting advice that can steer you towards success. It is by analysing financial data that you keep your business operations profitable as it helps judge business trends and make projections.
Differences between Bookkeeping and Accounting
Objectives of each
While both bookkeeping and accounting deal with accounting tasks and financial topics there are fundamental differences. Bookkeeping incorporates more data entry work to maintain systematic chronological records of financial activities and transactions. Accounting uses this data to determine the financial strength of a business and to further obtain the operating activity results of a business.
Process of each
The bookkeeping process involves keeping track of a business’s financial transactions. Entries are made for specific accounts using a debit and credit system. The entries are made chronologically either in manual ledgers or using bookkeeping software.
The data provided by bookkeepers is then classified and summarised by accountants to prepare in depth financial reports. The accounting tasks further include developing and managing financial systems and assist with developing a financial strategy for the business.
What does a bookkeeper do?
In bookkeeping there are two basic principles that is based upon, namely that every debit must have an equal credit and that all accounts must balance. To achieve this, a bookkeeper analyses financial transactions and keep records. They also adjust entries at the end of each accounting period.
What does an accountant do?
Accountants provide you with exact financial information from your business transactions. This helps keep track and manage the company’s money effectively, especially important during the initial stages. Further, for small businesses accounting can also help with payroll services and generating invoices.
What are the skills required?
Bookkeeping is the gateway to the accounting sector and by honing your skills, you can transition to being an accountant with the necessary qualifications. Areas that you will need to focus on include maths, attention to detail, computer skills, organisation, communication, problem solving, commitment and discipline.
Accountants are those who have achieved a degree in accounting and who with work experience can become a certified public accountant CPA.
Conclusion
Basically, bookkeeping and accounting are necessary to business success and work in tandem to achieve this. A business serious on achieving their financial goals in a practical and sustainable trajectory need the services of both bookkeepers and accountants.
Share this post: