What Is The Difference Between Accounting And Bookkeeping?
Accounting and bookkeeping are important in the day-to-day operations of companies big and small. They are essential processes that allow organizations to record and monitor the state of their financial activity. Accounting and bookkeeping are similar insofar as keeping financial records and monitoring transactions are concerned. However, both terms cannot be interchanged because they essentially refer to different tasks.
Accounting is the act of recording, storing, classifying, reporting, analyzing, interpreting and presenting financial data for both organizations and individuals. As an information system, accounting is used by business entities to determine the state of the company’s financial operations as well as to support crucial business decisions.
Accounting tasks are performed by accountants or certified public accountants (CPAs) who possess at least a bachelor’s degree in accounting or related field. CPAs are accountants that have been licensed by the Board of Accountancy of the state where they are practicing in. Unlike accountants that don’t have this certification, CPAs can file reports that will be sent to government regulators like the Securities and Exchange Commission.
Accounting tasks that accountants and CPAs do on a regular basis include looking into a company’s financial statements to determine accuracy and compliance with applicable laws. They also calculate taxes that the company needs to pay to the Internal Revenue Service, puts in order its tax returns and sees to it that the firm’s tax obligations are correctly and promptly paid. They also make sure that proper accounting procedures are observed in the accounting system being used by the company. Keeping financial records well-maintained and organized also comprise an important part of the job of accountants. After their thorough evaluation of the state of the company’s finances, accountants also suggest ways by which the company can minimize costs and improve their bottom lines
Bookkeeping, on the other hand, is simply one part of the entire accounting process. It refers to the recording of the financial transactions undertaken by a company. The recording is usually done in chronological fashion, with the bookkeeper ensuring that records on the company’s expenditures, receipts and others are properly kept accounted for. Bookkeeping tasks are done by bookkeepers, accounting clerks and auditing clerks.
Unlike accountants that need a bachelor’s degree in accounting, the entry point for most bookkeeping jobs is a high school diploma. They are usually trained on the job by an experienced employee or their supervisor. However, employers do prefer bookkeepers that have taken some accounting courses. Holding the Certified Bookkeeper designation enhances a bookkeeper’s chances of getting a job because it demonstrates proficiency in the task.
The task of bookkeepers centers on posting financial transactions either manually into a spreadsheet or on a bookkeeping software. If the organization’s financial records are not yet computerized, they have to employ basic mathematical operations like addition and subtraction as they do their work. In organizations where records are already computerized, bookkeepers have a much easier time since they don’t have to manually calculate the entries. However, they do have to learn to be proficient in and be comfortable working with computers.
While computers have made the job of bookkeepers easier, it has also increased their responsibilities. Many bookkeepers are now also responsible for preparing the payroll, buying supplies and equipment and billing, among others. With the help of computers, bookkeepers and accounting clerks come up with financial reports like the company’s balance sheets and income statements.
In many business organizations, bookkeepers assist accountants. Accountants rely on them to provide accurate reports and supporting documentation for all transactions that they have recorded. As the groundwork of the accounting process, the bookkeeping process of any company needs to be diligently and thoroughly carried out and bookkeepers have to see to it that this is done. If there are inaccuracies in the records, accountants are quick to point them out and conduct investigations on possible irregularities committed within the firm.