B Bookkeeping is responsible for recording financial transactions in the simplest of terms, while accounting is responsible for interpreting, classifying, analysing, reporting, and summarising financial data into meaningful information.
To understand the main differences between Bookkeeping and accounting, continue reading the rest of the post.
What is the role of a bookkeeper?
In the conventional sense, Bookkeeping has been around as long as commerce has existed, since about 2600 B.C. Traditionally a bookkeeper’s role is to keep complete records of the cash (or equivalent items when the barter system was used for trading) that has come in and gone out of the business. In a concise, easy-to-read way, bookkeepers record regular transactions, and these records allow the accountants to do their work.
There are some usual responsibilities for Bookkeeping:
- Financial transaction recording
- Debits and credits posting
- Invoice production
- Payroll handling
- Maintenance and balance of ledgers, financial statements, and subsidiaries
What is the role of an accountant?
An accountant evaluates the bookkeeper’s reported financial data and offers valuable business knowledge and financial recommendations based on that data to entrepreneurs or businessman. There are some everyday tasks for accountancy:
- Verifying and evaluating information
- Generate reports, conduct audits and prepare financial reporting documents such as tax returns, income statement and balance sheet.
- Prepare cash flow projections and manage it on an ongoing basis
- Prepare product wise, department wise, geography wise profit and loss account
- Providing data for projections, industry patterns and growth opportunities
- Helping the company owner understand the effect of financial choices
- Adjustment entries
Significant differences between Bookkeeping vs Accounting
There is a massive misconception that Bookkeeping vs accounting is considered to be one profession and are interrelated to each other. There are some significant variations between the two, even though they seem to be somewhat similar. 123Financials – accountants in Central London have mentioned accounting vs bookkeeping differences here to address this confusion —
| Basis | Bookkeeping | Accounting |
| Meaning | Bookkeeping is the process of identifying, measuring, and recording transactions related to money. | Accounting includes summarising, analysing, interpreting, and communicating financial data into meaningful information. |
| Required Skills | Bookkeeping involves a different skillset and doesn’t require any particular type of qualification. However, there are some professional qualifications. | Accounting is performed by Senior staff or professionals as it requires specific skills due to its rigid and analytical nature. |
| Decision Making | Based on the data or information provided by a bookkeeper, management cannot take any critical decision. | Based on data or information provided by an accountant, the management can take specific decisions. |
| Objective | The objective of Bookkeeping is to maintain systematic records of financial transactions. | The objective of accounting is to analyse the financial data and summarise and communicate it to the end-users. |
| Preparation of Financial Statements | Financial statements are usually not prepared by the bookkeepers | The accountants prepare financial statements. |
| Analysis | The bookkeeping process does not require any analysis. | Accounting considers bookkeeping data to analyse and interpret the data and then summarise it into useful information. |
| Types | Bookkeeping is of 2 types-
Single-entry Bookkeeping Double-entry Bookkeeping |
There are various types of accounting, like financial, management, forensic etc. |
| Bookkeepers and Accountants | Bookkeepers are needed to be precise and knowledgeable about financial topics in their work. | An accountant usually supervises the work of bookkeepers. |
Winding-up
Accounting and Bookkeeping are two separate tasks, despite the similarities in duties and responsibilities. An accountant cannot do their job correctly till the time bookkeeping is complete. We hope this article has helped to explain the differences and similarities.
Some company owners learn to handle their accounting independently. In contrast, others delegate the work and prefer to hire an accountant to concentrate on their company’s other vital aspects.
Whatever option you choose, investing in your business’s finances, whether it be money, skill or time, will only help your company expand and grow in the upcoming times.
