Accounting and Bookkeeping – what is the difference between both?

Accountingand Bookkeeping–whatis thedifferencebetween both?

When talking about accounting vs. bookkeeping, it is key to understand what both of these things are exactly, and what are the differences between them.

By Definition, Bookkeeping is primarily about identifying, measuring, and recording financial transactions while Accounting is the process of summarizing, interpreting, and reporting the financial transactions that have been classified into a ledger account.

Bookkeeping and accounting are two extremely important functions for any business organization. Simply put, an accountant is responsible for recording financial transactions, while bookkeeping is responsible for interpreting, classifying, analyzing, reporting, and summarizing financial data.

To learn more about the key distinctions between accounting and bookkeeping, continue reading. The following list summarises the key distinctions between the two:

1.

DECISION MAKING

Management cannot make decisions based on data provided by a bookkeeper. Depending on the data provided by accountants, management can make critical business decisions

2. OBJECTIVE

The purpose of bookkeeping is to keep correct and systematic records of all financial transactions. The goal of accounting is to measure financial status and further report information to the relevant authorities.

3. BUDGET PREPARATION

Budgets and financial statements are not prepared as part of the bookkeeping process. Financial statements are prepared during the accounting process.

4. REQUIRED SKILLS

bookkeeping does not require any special skills, on the other hand, Accounting requires special skills due to its analytical and complex nature

WHEN SHOULD YOU HIRE A PROFESSIONAL?

Here are three cases that indicate it’s time to hire a financial professional:

1. YOUR TAXES ARE COMPLICATED

If your taxes are too complicated to handle on your own, with multiple streams of income, foreign investment, multiple deductions, or other considerations, it’s time to hire an accountant. An accountant can save you hours and help you stay on top of important matters like payroll, tax deductions, and tax returns.

2. YOU SPEND TOO MUCH TIME IN ACCOUNTING

If you spend so much time worrying about accounting tasks that you’re unable to work to grow your business or keep existing customers happy, you’re doing your business a disservice. You can make more money in the long run if you leave your accounting to the professionals and focus on your growth prospects.

3. YOUR BUSINESS IS EXPERIENCING GROWTH

Doing the bookkeeping and/ or accounting yourself may be fine when your business is small, but if your business is growing, it might be time to enlist someone to help you. You can start by contacting an accountant to balance the books once a month and a CPA to handle your taxes. Then, as your accounting needs increase, bring someone on staff.

CONCLUSION

Bookkeeping services might be provided by an accountant but someone who only knows bookkeeping cannot provide you with accounting for small businesses. A tax accountant, in this way, would be someone overqualified for a bookkeeper’s job. Majorly, a tax accountant is always separate from a bookkeeper. This is an informative article. If you are looking for a tax accountant, bookkeeping services in toronto, or accounting for small businesses service provider, please get in touch with Muia Consulting.