The Bookkeeper Hub

BOOKKEEPING VS ACCOUNTING

Your business wellness depends on understanding your business. Knowing the difference between bookkeeping and accounting is the first step. There are a lot of jargon words thrown around in the financial world and the biggest question most people have is, what is the difference between bookkeeping and accounting? It’s a fair question: they both seem so similar and in finance, they’re used in a way that’s interchangeable. It’s important to know, however, that these are both very different concepts. While bookkeeping is about recording financial transactions, accounting does something very different. An accounting team deals with analysis, interpretation, reporting, and summarising the financial information of a business. In this article, we’re going to look at both bookkeeping and accounting and see what the differences are. What is bookkeeping? Bookkeepers work to record and classify all of the financial transactions of a business. It’s the basis of an accountant’s job, and yet accounting forms everything bigger than this in finance. Bookkeepers have to maintain very accurate records of the incomings and outgoings of the business. It’s this information that can help a business make better decisions about their investments and finances, so accuracy really does matter. It’s critical for businesses to have the correct information, which is why accurate bookkeeping is a must. The steps involved in bookkeeping for a business include things like preparing ledger accounts, identifying financial transactions, and recording them, too. This has to be done regularly for a business to know what they can spend their money on. Bookkeeping is vital for a business so they can keep their finances in order. Throughout the bookkeeping process, an accountant supervises and works with the bookkeeper to ensure that the numbers in the business are clear and defined. A record of all of the revenues of the business is provided by the bookkeeper and the company can tally the income and goals for their finances with the actual income and expenses. This enables the business to maintain their benchmark to future decisions.

What is accounting? Along with a bookkeeper, an accounting team will record, measure, and communicate financial information for the business. The accounting team helps to determine the financial position of a firm and present the same to any investors and stakeholders. An accountant can also help the business in their decision making. The best accounting team will be able to convey credibility to the market, too, and this is known as the language of business. Accounting is designed to offer a business owner a clear view of their finances and whether they can grow their business as planned or not. Professional accountants can take the baseline of the data and interpret this looking forward for the business. They can show the business their financial position and tell a business owner whether they are in the right financial position at a particular time. Accounting also contains information about the firm’s cash flow. What are the differences? There are some main differences between accounting and bookkeeping. Bookkeeping records the financial data systematically, but accounting analyses that data and prepares a report based on it. Bookkeeping generally isn’t involved in management decisions regarding finances, but accountants can help management teams to make the right decisions regarding their financial future in business.

Reports prepared by an accounting team help to make further financial reports in the business, but bookkeeping teams don’t do that.

Bookkeepers are required to have relevant experience, qualifications and be BAS agents to practice, but accountants have to have a degree or additional certifications to practice. Both of these teams are not exclusive of each other – they are both necessary for a business to function correctly. Both teams work to help a business with their finances and help them to make the best possible financial decisions.

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