Keeping meticulous records for the income and expenditure of your business requires a person who is considered an expert at number crunching. Every client has experienced vacillating between choosing an accountant and bookkeeper for their needs especially when there are requirements that need to be complied with. Even when you have already hired someone to assist you with your day-to-day transactions, it can be pretty hard to know exactly where to draw the line. While there are a number of options for you to choose from, the process of choosing is not that easy.
Accounting vs Bookkeeping
Bookkeeping has to do with daily financial transactions including sales, payments, receipts and purchases. A general ledger plays an important role in recording these items, but many small businesses also turn to bookkeeping software for keeping track of various transactions including entries, debits and credits. Bookkeeping involves generating data about the organisation’s activity.
Although bookkeepers do not analyse the financial transactions, they still play a vital role to ensure the business will run efficiently. For instance, recording receipts and payments ensure that correct amounts are paid and received in a timely manner. There are also prescribed procedures that bookkeepers need to follow. They need to see to it that transactions are recorded on a daily basis.
On the other hand, accounting turns data into information. The primary role of an accountant is to verify the data entered, and once data have been verified, they will be used for generating reports, performing audits, analysing the account and preparing financial records. An accountant also ensures that the financial information can be used for forecasts, opportunity for growth, business trends and many others.
The financial data are interpreted as a way of evaluating the business’ efficiency. The accountant will also be the one to decide if there is still a variety of areas and tasks that need work such as management accounting, financial accounting, auditing and financial services.
The key differences between accounting and bookkeeping:
• Financial statement is part of the accounting process, but not the bookkeeping process.
• The process cannot proceed to accounting without taking the first step, which is bookkeeping.
• Bookkeeping does not have the power to disclose correct financial position as it is an accounting job. Accountants help clients see the true and fair view of the business’ financial status and profitability.
• Bookkeeping involves keeping proper records of financial transactions while accounting measures, evaluates, groups, summarises and records transactions.
Bookkeeping and accounting work hand in hand. One cannot function without the other, hence both can be considered inseparable. Bookkeeping is the base for accounting and an important part of the entire process. Every business owner needs both an accountant and bookkeeper to keep the business on its feet.