Business 101: Accountant vs. Bookkeeper
Although there is a difference between accounting and bookkeeping, they are generally used interchangeably. Anyone new in business would always hear the words accounting and bookkeeping. Since they are synergistic, small firms typically have accounting and bookkeeping functions.
In bookkeeping, a general ledger is used to post every business transaction. The ledger has all the financial transactions of a company from its inception.
In accounting, all the information in the ledger is used as insights to create financial plans and decisions.
Bookkeeping
Bookkeeping is a daily record-keeping of all the financial transactions of a company. Small business accounting and bookkeeping are critical; it has to begin even if your company is just a start-up. Do not wait till your company grows into a big corporation before considering help with your business by professional bookkeepers.
Posting is the term for recording all financial transactions or accounts. Bookkeeping tracks all the following accounts for financial statements and tax obligation purposes.
- Asset Accounts – include both tangible and intangible items that your company owns. Tangible assets might consist of laptops, vehicles, machinery, property, or buildings. While abstract assets might include copyrights, logos, or trademarks.
- Expense Accounts – can consist of business purchases to help create additional income. Maybe products and services. Furthermore, expenses may be leases, promotions, and employee salaries.
- Income Accounts – or revenue, records all the cash made from selling your services or products. It could additionally count the returns from other investments.
- Liability Accounts – can include business loans, unsettled utility bills, outstanding debts, payment obligations to financial institutions, and other payables.
- Equity Accounts – shows the current worth or firm or business valuation. A simple formula is subtracting a firm’s liabilities from its assets.
Bookkeeping Methods
A quality that stands out in bookkeeping is a stickler for precision. Even the most thorough bookkeeper can commit mistakes; that’s why they usually work under an accountant’s supervision unless the business is very small. Studies found that having external accounting or bookkeeping services like Dedicated Bookkeeping Solutions is a big help for your company.
The two bookkeeping methods are:
- Single-Entry System – entails a single entry of all company transactions in the general ledger. This system works best with small companies with less revenue.
- Double-Entry System – is the golden standard of record-keeping usually used by most business owners, accountants, and bookkeepers. This system is more comprehensive and complicated than single-entry.
Accounting
Accounting provides the business owner with essential data about the firm’s financial standing. It is a process that consists of measuring, processing, and communicating financial information. On top of that, accounting also deals with tax preparation and other needed financial materials.
The accounting function can be outsourced to a private accounting firm. Even in some small businesses, outsourcing accounting and bookkeeping functions is very common.
Accounting Methods
- Cash Accounting – this type is prevalent among local business proprietors. The only transactions posted in cash accounting are cash spent or cash received. A sale is posted when the payment is received, and an expense is posted when the bill is paid.
- Accrual Accounting – under this process, transactions are posted when they are incurred rather than awaiting payment. The same goes with expenses, even if no payment is made yet.
Conclusion
Although accounting and bookkeeping are different, there are more similarities than differences. They work on a common objective of boosting the business’ financial situation. Both are tax compliant and have many overlapping functions, particularly in small businesses.
Accounting professionals can take the role of bookkeepers, yet bookkeepers can not be called an accountant unless with the proper education and certification. Nonetheless, accounting knowledge is required in both disciplines.
Finally, a company of any size can substantially benefit from the services of an accountant or bookkeeper.
