Accounting is a process of recording, reporting, and analyzing a company’s financials. Bookkeeping is the recording part of the accounting process, in which the business financial transactions are entered into a database.
Both Accounting and Bookkeeping are essential for every business organization; it’s because they can deal with financial data and generate reports using financial transactions. Besides, both these processes have their own set of advantages. The major misconception regarding Accounting vs Bookkeeping is that both are considered as the same profession. They seem to be similar, but there are some differences.
Accounting vs Bookkeeping:
|Definition||It is the process of interpreting, summarizing, and communicating financial transactions.||It is related to measuring, identifying, and recording financial transactions.|
|Objective||The objective is to communicate the information to the authorities and gauge the financial situation.||The objective is to keep the records of financial transactions systemic.|
|Decision Making||Takes critical business decisions depending on the data.||It can’t make decisions based on the data.|
|Skills Required||It requires analytical skills.||It doesn’t require any special skill set.|
|Preparation of Financial Statements||Financial statements are prepared during the process of accounting.||Financial statements are prepared in bookkeeping.|
|Types||There are two types: Plans loan proposals and preparation of the company’s budget.||There are two types: Single entry bookkeeping and double-entry bookkeeping.|
|Analysis||It uses bookkeeping information to analyze the data.||It doesn’t require any analysis.|
|Accountants and Bookkeepers||Accountants can obtain the title of Certified Public Accountant (CPA) with sufficient experience and education.||The bookkeeper’s work is overseen by accountants.|
Responsibilities of an Accountant:
The responsibilities of an accountant can be categorized into four areas:
- Data Management: Managing the data and overseeing how the data is stored.
- Financial Reports: Accountants can generate statements and some standard business reports.
- Financial Analysis and Consultation: Advising management and assessing data.
- Regulatory compliance: Ensuring the organization is following business standards.
Responsibilities of a Bookkeeper:
Here are the responsibilities typically associated with the bookkeeping role:
- Recommend, monitor, and implement the bookkeeping procedures and policies.
- Manage or implement the accounting software for the development of a double-entry system.
- Enter expenses into the software in all methods of payment.
- Handle banking activities.
- Verify recorded expenses and manage the approvals.
- Flag discrepancies and Assist with audits.
Accounting and Bookkeeping play a vital part in every business. Hope these differences help you to choose the right career path. Any Questions? Comment below.