What Are the Differences Between Bookkeepers and Accountants?
The average person would struggle to describe the differences between accounting and bookkeeping. Although both professions are focused on financials, they provide different types of support to a business.
The field of bookkeeping tends to focus on administrative duties, such as ensuring that transactions are properly recorded. Accounting is focused on providing insights. Information from bookkeepers may be used to provide these assessments.
The Purpose of Bookkeeping
Bookkeeping involves consistently recording financial transactions. It’s an essential part of ensuring that a company succeeds financially.
- Documenting transactions
- Providing invoices
- Posting credits and debits
- Managing ledgers, accounts, and subsidiaries
- Handling payroll
One of the primary aspects of bookkeeping is maintaining a ledger. This is a document where bookkeepers record the sale and expense receipts for a business. This is typically described as “posting.” As the number of completed sales rises, the ledger will need to be posted more often. There are many ways to create a ledger. While businesses often use computerized spreadsheets or software, it’s possible to create one with just a piece of paper.
How complex a bookkeeping system will be will vary on many factors, such as a business’ size and the number of transactions posted each day, week, and month. Every sale and purchase must be posted in the ledger. In some cases, supporting documents are necessary. You can find out when supporting documents are required on the IRS website.
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The Purpose of Accounting
Accountants use ledgers to create complex financial models.
While bookkeeping is mostly transactional, the work accountants do is more subjective.
- Preparing financial statements for a company
- Preparing adjusting entries, which are expenses that have occurred but have not been posted in the general ledger
- Handling tax returns
- Analyzing operational costs
- Helping business owners to comprehend the effect financial decisions will have
Through accounting, it’s possible to build reports that combine different financial indicators. This can give a clearer picture of a business’ cash flow and profitability. With accounting, the sales and purchases recorded in a ledger can become statements that indicate how a business is doing. It’s standard for business owners to turn to accountants when planning and filing taxes, and when making financial forecasts. Accountants can help businesses to manage finances more effectively.
Bookkeeping Vs. Accounting
In some cases, bookkeepers and accountants will be taking on the same tasks. Typically, however, the job of a bookkeeper is to ensure finances stay organized and that transactions are recorded. Accountants offer analysis, consultation, and tax assistance. The work an accountant does is often a supplement or an expansion of the work done by a bookkeeper.
The Credentials of Bookkeepers
Generally, it isn’t a requirement for bookkeepers to be formally educated. In order to succeed, bookkeepers need to understand important financial topics and take accuracy seriously. Generally, a small business owner or an accountant will supervise the work of the bookkeeper. Because of this, bookkeepers can’t have the title of an accountant. It is considered to be a separate role.
The Credentials of an Accountant
In order to become an accountant, a person will typically need a bachelor’s degree. While accounting degrees are preferred, finance degrees are usually thought to be a sufficient substitute. Other types of bachelor’s degrees are usually not acceptable.
Another thing that separates accountants from bookkeepers is that they can earn professional certifications. As an example, if an accountant has the appropriate levels of experience and education, they can become a CPA (Certified Public Accountant). In order for an accountant to become a CPA, they must have experience and receive a passing score on the Uniform Certified Public Accountant exam.