Bookkeeping and Accounting tend to be some of the most important ancillary functions of the company. It is important to recognize that bookkeeping and accountancy help the company keep a record of its transactions. Keeping this track can help users ensure that they are well aware of their profitability, which can eventually help them decide their future trajectory in terms of business strategy.
Generally, a company has both bookkeepers as well as accountants. However, in some cases, accountants perform the tasks of a bookkeeper, and therefore, bookkeepers are not specifically hired in such scenarios.
What is bookkeeping?
Bookkeeping can be defined as record keeping. During the normal course of business, numerous different transactions are entailed within the business. Properly recording all these transactions, such that none of the details are missed out, can be regarded as bookkeeping.
The main aim and focus of bookkeeping are to ensure that records are kept within the company for both decision-making purposes and creating a proper ledger that can prevent any fraud or cash embezzlement.
Objectives of Bookkeeping
Bookkeeping comprises the following tasks and objectives:
- Recording financial transactions on a regular basis
- Posting relevant debits and credits in the respective accounts
- Creation of invoices
- Preparation of Financial Statements (including Income Statement, Statement of Financial Position, and Cash Flow Statement – if required)
- Maintaining all the ledgers of the organization, and ensuring that all the accounts are properly balanced.
- Payroll Management – distributing salaries, and completing payroll for the organization
Amidst all the tasks and objectives of a bookkeeper that have been mentioned above, it can be seen that maintaining the general ledger tends to be the primitive task of bookkeeping. The general ledger itself is a fairly basic document that requires the bookkeeper to record the relevant amounts from sales invoices and purchase invoices.
This task of posting tends to be the most important (as well as time-consuming) task for an ordinary bookkeeper, even though the tasks and objectives of bookkeeping need to be carried out with specialized software or a computer spreadsheet.
Credentials required to be a Bookkeeper
Generally, bookkeepers are not required to have any special formal education. Since the work is mainly related to data entry, all they need is a good insight and approach towards basic accounting knowledge that enables them to execute double-entry properly.
The work carried out by the bookkeeper is mostly supervised or overlooked by an accountant.
What is accounting?
Accounting can be termed as an advanced level of bookkeeping. In other words, accounting comprises both bookkeeping and some additional tasks and objectives that are not in a typical job description of a bookkeeper. Hence, this makes the job of an accountant fairly more subjective, as well as intuitive as compared to a bookkeeper.
The main objective of accounting (and accountants) is to ensure that all records have been properly kept and maintained and that these records are of substance to the organization when it comes to decision making. Hence, the primitive role of accountants is to ensure that the accounting records are well kept and properly analyzed so that the decision-makers can use this information to derive greater value for the business.
Objectives of Accounting
Accounting mainly comprises of the following tasks:
- Preparation of adjusting entries for the organization. This includes recording all expenses that have occurred, but are not yet accounted for (or recorded) in the books of the company.
- Conducting a fair review of the financial statement of the company.
- Analysis – analyzing cost of operations, and other mechanical ratios that help to give a deeper insight regarding the profitability of the company.
- Completion of income tax returns – This is a fairly important task and objective, primarily because of the fact that it helps companies to make some useful decisions regarding the company.
- Financial decisions making, as well as contingency plans involved when company makes these decisions.
Similarities between Bookkeepers and Accountants
Bookkeeping and Accountants are similar on several grounds. The similarities between bookkeepers and accountants are given below:
- Both bookkeepers and accountants are known for handling financial data.
- Both bookkeepers and accountants handle data entry work for financial transactions taking place within the company.
- They are not involved in the decision making process of the company. They are only supposed to provide historic information, based on which the higher management is supposed to take decisions.
- They share the common goal of providing the organization (or the higher management) with accurate data that can be used for proper decision making of the company.
Differences between Bookkeepers and Accountants
Bookkeeping and Accounting appear to be fairly similar. However, both accounting, as well as bookkeeping are also different on numerous different grounds. The differences between bookkeepers and accountants are given below:
- The accounting process mainly comprises of recording, interpreting, as well as classifying other financial data. On the other hand, bookkeeping only constitutes of recording the financial transactions. This step tends to be the first step for accountants, whereas for bookkeepers, this is the only step.
- Bookkeeping does not record any financial statements. On the contrary, accountants have the main task and objective of preparation of financial statements.
- Typically, bookkeepers are not required to present any analysis. On the other hand, accountants are required to present their analysis that further acts as an aid towards decision making.
- Bookkeeping does not require any special skill sets. However, for accounting related tasks, there are special degrees as well as skill sets that are required.
- While bookkeeping might be a suitable option for small scale businesses, it might not be well suited for larger organizations. Therefore, accounting tends to be the core task for these larger organizations.
Are Accountants same as Bookkeepers?
Based on the information that has been presented above, it can be seen that there is a difference between accountants and bookkeepers in the sense that both of them have different job descriptions. In the same manner, it can be seen that there are also different credentials and qualifications required for both accountants and bookkeepers.
Whereas an accountant can be a bookkeeper, but a bookkeeper cannot be an accountant. This is because accountancy requires a higher skill set to analyze financial numbers into something more meaningful.
Therefore, it would not be correct to state that they are similar. They are different and require different technicalities to be hired as accountants and bookkeepers.