It can be difficult to understand the difference between bookkeeping and accounting because it seems they are often used interchangeably by the general public. Bookkeeping as well as accounting are considered vital functions when it comes to improving the health and financial standing of your business but they both serve different functions. Bookkeeping services are used to record all financial transactions that your business completes. While accounting services focus on analyzing, interpreting, and acting upon financial data that is found. Both services work to improve the financial health of the business, but the difference is that accounting services are used to analyze data while bookkeeping is used to record the data.
What Is Bookkeeping?
Bookkeeping is the process of recording and storing all of the financial transactions that a business, individual, or nonprofit organization completes. The records are designed to be kept in a chronological order for each day of the month to provide the most accurate records as possible. It is important for the financial health of your business to keep accurate and thorough bookkeeping records throughout the entire financial year.
What Are Examples Of Bookkeeping Tasks?
Bookkeeping requires the recording of a variety of different financial factors when it comes to keeping your business financially healthy. Below are examples of bookkeeping tasks that are common occurrences every month.
- Recording and tracking receipts from your customers.
- Billing customers for services you provided them or for goods sold to them.
- Recording the invoices that are sent from suppliers, as well as keeping tracking of invoices that have been paid.
- Recording and paying salaries for your businesses employees.
- Tracking and processing government taxes and policies.
As you can see from the above tasks, bookkeeping requires a firm knowledge of financial credit and debits as well as implements knowledge from financial accounting.
What Is Accounting?
Now that you have a better understanding of what bookkeeping is, you can now learn what accounting is to see the differences between the two. Accountants are responsible for analyzing financial statements, business reports, and financial transactions in order to improve the financial health of your business. Accounting services provide your business with an overview of your financial standing in an attempt to help your business run more efficiently. Accounting services can work with small businesses, individuals, as well as non-profit organizations. It can be vital for the health of your business as well as the efficiency of your business to partner with an accounting service provider.
What Are Examples Of Accounting Tasks?
Accountants are required to work through a wide variety of different reports as well as financial statements in order to create an actionable assessment for your business. Below are a few examples of accounting tasks that take place on a routine basis.
- Double check financial statements to ensure that the information is accurate.
- Track the status of financial statements to ensure that they comply with local and federal laws and regulations.
- Cash Flow Mangement and analyzing the cash flow system in place to develop a plan to improve the operations efficiency.
- Auditing the financial spending and expenses to save money for the business, organization, or individual.
- Analyze day to day operations to recommend methods to reduce daily expenses, improve profits, and improve daily efficiencies.
Accountants are responsible for a wide variety of different tasks in order to improve the overall operations of the business. It is vital to work with an accounting service provider who has years of experience working with businesses of different sizes.
The Similarities Between Bookkeeping And Accounting?
It is common for the average person to lump bookkeeping and accounting together if they don’t have experience in the industry. Both bookkeeping and accounting services are similar because they both operate directly with financial data. Bookkeeping focuses mostly on recording the financial data, while accounting expands beyond that to interpret the data. However, it is common to see in small businesses where the bookkeeper will begin performing accounting tasks as they don’t have two separate employees. It is important for both bookkeepers as well as accountants to have a firm understanding of accounting and financial knowledge.
How Is Bookkeeping Different From Accounting?
Bookkeeping has many factors that are similar to accounting as a whole, but accounting is different from bookkeeping because of how in depth it goes. Bookkeeping is typically thought of as only recording the financial transactions and data that is coming in, but accounting is different because it takes it multiple steps further. Instead of just recording the financial data, accounting takes the recorded data and analyzes it to improve the financial standing of business. It takes years of professional education and experience to become a certified public accountant.