The Differences between Bookkeeping and Accounting

Unless you’re a bookkeeper or accountant, you probably don’t give much thought to the differences and similarities between these two professions. In particular, they don’t realize how they function in the world of small business. Many people assume that they are two ways of saying the same thing. But the truth is, although bookkeeping and accounting go hand in hand when it comes to business financials, they are two different jobs. Let’s take a look at the role these two activities play in your business and why it’s essential to have a good strategy for both aspects of your finances.

Bookkeeping – Day to Day Recording

Bookkeeping is the process of consistently recording day to day transactions in your business. They enter and process all financial data. A bookkeeper will make it possible to obtain snapshots and reports for your business when needed.

They will generate relevant reports, such as your income statements, cash flow statements, and balance sheets, among others. The bookkeeper’s other functions include handling payroll, accounts receivable, accounts payable, monitoring debt, and budgeting. Your bookkeeper will work with the accountant during tax season to provide all information needed to prepare your tax returns.

Accounting – The Big Picture

Your accountant helps to analyze financial statements and help you develop your strategy based on that data. Through analysis, they can provide essential economic information to managers, investors, and owners.

Ongoing, the accountant’s duties include analyzing operations costs, completing all applicable tax returns, monitoring, and reviewing financial statements generated by the bookkeeper, and preparing advanced financial statements of their own. They take an overview of the business’s financial health and give strategic advice from their findings.

Today’s Hybrid Bookkeeping/Accounting

With the arrival of bookkeeping and accounting software, the lines between bookkeeping and accounting became blended. It’s not uncommon to find a person or company that performs both functions for a business. Some tasks that used to be done by accountants are now possible for bookkeepers to do through accounting software. One example of this is the ability to generate advanced financial statements through bookkeeping software.

Bookkeeping and Accounting – Complementary Skill Sets

Accountants have a minimum of a bachelor’s degree in accounting. They have successfully passed the Certified Public Accountant (CPA) exam. They have worked for an accountant for a number of work hours.

A bookkeeper is not required to have a degree or formal training, and most of the skills they possess are learned on the job.
However, both professions are data-driven, and both jobs require number-crunching. So, a love of numbers is essential in both roles.

When Your Business Needs Help

At JStevens Accounting, we offer bookkeeping and accounting services. You’ll find that we have both types of professionals on staff. We can help keep track of your day to day financials, right through the preparation of your tax returns and strategic planning. We can stay on top of your records and reports and learn how to get usable information from your business activities.

Contact us today, and let’s set up a consultation. Get the benefit of a firm that offers a big picture plan for keeping your business on track!