What Are The Differences Between A Bookkeeper And An Accountant?

Regardless of your business’s industry, size, and model, bookkeeping and accounting professionals play an essential role in the financial health of your business. While many people know that a bookkeeper is not the same as an accountant, they can’t put their finger on what exactly differentiates a bookkeeper vs accountant. 

In this guide, you’ll learn what separates an accountant from a bookkeeper, which your business should hire and when to employ them. 

Bookkeeper vs. Accountant: An overview 

A bookkeeper starts and an accountant finishes. In other words, a bookkeeper handles the initial stage of an accounting process which is recording and organizing daily financial transactions. An accountant takes up the work done by a bookkeeper and carries on the remaining tasks of the accounting cycle. Accountants are then responsible for analyzing and interpreting data gathered by bookkeepers, consulting with business owners, and preparing financial reports. 

To look at the differences in detail, we will compare bookkeeper vs accountant in two major aspects: job description and required credentials.  

Bookkeeper vs. Accountant: Job description 

Duties of a bookkeeper:

The practice of bookkeeping is far from new to the human race. Bookkeeping may have existed as early as around 2600 B.C. A bookkeeper’s core duty is to maintain complete and accurate records of the money coming in and out of business in a general ledger. Bookkeepers keep track of daily transactions in a consistent, systematic way, and their records allow the accountants to perform their jobs. 

Apart from the primary task of managing accounting ledgers, there are many other responsibilities that a company would ask from a bookkeeper.

A bookkeeper’s job description typically includes: 

  • Entering and correcting Accounts Payable and Accounts Receivable
  • Reconciling accounts and matching bank transactions
  • Issuing invoices and processing payments 
  • Managing expense reports 
  • Processing payroll 
  • Adjusting entries where necessary and as instructed by the accountant

Besides the above-mentioned typical responsibilities of bookkeepers, their duties vary depending on the industrial environment and business nature. For example, if you own a cannabis business, you may want to look for someone who can use seed-to-sale software (Biotrack, MJ Freeway, METRC, etc.) Or a bookkeeper who knows how to deal with IFTA (International Fuel Tax Agreement) will be an ideal choice for trucking businesses. 

Duties of an accountant: 

 An accountant analyzes the financial data collected by the bookkeeper to provide vital business insights and financial advice to the business owner. Accountants look at the big picture, putting key components of your business’s finances together and presenting them via financial statements. Such reports offer you a clear view of where your finances stand and what they imply, as well as what you can and should do about them and where you may anticipate your company will go in the near future.

The following are a few examples of typical requirements in an accounting job description: 

  • Preparing accounts and tax returns
  • Monitoring business spending and budgets
  • Auditing and analyzing financial performance
  • Administering payroll
  • Compiling and presenting financial and budget reports
  • Providing tax planning services 
  • Providing timely forecasts and important insights for future growth

Accounting work is often office-based, with usual 9 to 5 working hours. However, the workload typically becomes much greater during peak seasons like the tax period and the end of a fiscal year.   

In small businesses, an accountant may undertake all of the activities associated with the accounting process, but in larger businesses, various accountants are often in charge of different accounting areas. This might cover both financial and managerial accounting.

Bookkeeper vs. Accountant: Credentials and licensing 

Requirements of a bookkeeper:

In most cases, bookkeepers don’t need to acquire any certificates to handle the books. Businesses or employers usually only require their bookkeepers to have a high school degree providing basic math, communication, and computer skills. Other necessary skills like time management, organization, and multitasking can also be gained in high school.

While bookkeeping is not a licensed profession, businesses sometimes ask for a certification as proof of expertise. Many big organizations offer accreditation and licensing to bookkeepers, such as the American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB).

Software companies for bookkeeping and accounting such as QuickBooks, Excel, Xero offer certifications to highlight bookkeepers’ skills and abilities using these software products. So if your accounting system is heavily dependent on software, a bookkeeper with a sophisticated understanding of accounting-support programs should be your best option. That’s when these software certifications can help you. 

Requirements of an accountant:

Although not always mandatory, an accountant needs to obtain at least a bachelor’s degree in accounting or related fields like business, economics, finance, or management. 

In addition to a university degree, an accountant can earn advanced accounting certificates to demonstrate their competency, such as a CPA certificate. A CPA is a “certified public accountant” who has satisfied the state’s standards and passed the Uniform CPA test. They must also meet continuing education criteria to keep their certification. 

When interviewing for a CPA, seek someone knowledgeable about tax law, proficient in accounting software and with excellent communication skills. They should be familiar with your sector as well as the unique demands and expectations of small enterprises.

When to hire a bookkeeper vs. an accountant

If your business is still in the early stages and you feel confident managing all the receipts and recording transactions, you may not need a bookkeeper yet. Do your own bookkeeping and hire a part-time accountant as a financial consultant.

However, when your business starts growing you’ll soon be overwhelmed by the paperwork. Then, it’s the right time to get a full-time bookkeeper to record daily data and keep your finances organized. Plus, an accountant at this point can help you create a long-term business plan, handle taxes neatly or advise you on the legal structure. 

Before you finally decide between a bookkeeper vs accountant, consider not only their credentials and expertise but also their cost, reputation, and their experience working in your industry. 

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Accounting Vs. Bookkeeping: What Are The Differences?

In finance, accounting and bookkeeping go side by side. They both have the same goal, and each requires basic accounting knowledge to work with financial data. While many people may confuse and use these two terms interchangeably, they are in fact different.    

Basically, accounting is the overall process, while bookkeeping is a step within that process. The accounting process involves recording, summarizing, analyzing, consulting, and reporting on a company’s financials. Bookkeeping is the recording step of that process, in which all of the business’s financial transactions (revenue and expenses) are recorded onto a database.

This article will explain how accounting and bookkeeping are not the same by highlighting 10 key differences. Before presenting a table of those differences, the definitions and scope of bookkeeping and accounting will be covered. 

What is bookkeeping?

Bookkeeping is the systematic process of recording and classifying all business transactions that occur while operating a business. All financial activities: sales, purchases, taxes, interest, payroll and other operational expenses, loans, investments are recorded in books of accounts. Bookkeepers post these transactions to the general ledger, which is then used while preparing a balance sheet.

Bookkeeping is an indispensable part of accounting and is primarily focused on tracking day-to-day financial transactions. Its purpose is to gather financial information and make sure that every record is correct, up to date, and complete. As a result, accuracy is critical to this procedure. The complexity of a bookkeeping system depends on the business size and the total number of transactions completed daily, weekly, and monthly.

Bookkeeping tasks

The responsibilities of a bookkeeper will vary depending on the model of your business. Here are some typical tasks for a bookkeeping position:

  • Recording financial transactions
  • Billing for goods sold or services provided to customers
  • Processing accounts receivable and accounts payable
  • Recording receipts 
  • Verifying invoices from suppliers
  • Completing payroll 
  • Maintaining and balancing subsidiaries, general ledgers, and historical accounts
  • Performing bank reconciliation

In short, bookkeeping is integral to the effective day-to-day running of a business. As bookkeepers’ primary responsibilities focus on organizing and recording financial transactions, they lay a solid foundation for accounting analysis. In other words, a business’s performance will go downhill if its bookkeeping system is not working properly. 

Read/check out these articles (from Shoeboxed) to learn more: 

What is accounting?

 Accounting is a broader concept than bookkeeping. Accounting is the process of reviewing, interpreting, and summarizing the financial records provided by the bookkeeping system to issue financial statements. A complete accounting cycle starts from recording business transactions and finishes by publishing financial reports at the end of a fiscal year. 

Accounting is also known as the language of business, as it helps stakeholders grasp the overall of a company’s financial performance. It tells you whether your business is making a profit, the current value of your assets and liabilities, where your money goes, and what changes should be made in the future. 

Accounting tasks 

An essential part of accounting is presenting financial information in the form of multipurpose financial statements (balance sheets, profit or loss statements, cash flow statements, etc.). These reports must adhere to generally accepted accounting principles, known as GAAP or US GAAP.

Below are some of the main tasks for an accountant: 

  • Reviewing and verifying financial data 
  • Analyzing operational costs 
  • Filing income tax returns, conducting tax planning and providing tax advisory services
  • Preparing financial statements
  • Ensuring regulatory compliance  
  • Assisting the business owner in making financial decisions
  • Undertaking financial audits 

It goes without saying that every business, regardless of size, needs accounting. Thanks to thorough accounting practices, managers and external stakeholders can fully understand what’s going on financially within the company, allowing them to make informed, strategic decisions for future growth.     

Read/check out these articles (from Shoeboxed) to learn more: 

Top 10 differences between bookkeeping vs. accounting 

Bookkeeping and accounting sometimes overlap each other, but the following are 10 major differences to help you distinguish between the two:

accounting vs bookkeeping: what are the differences
10 major differences between accounting and bookkeeping

Conclusion 

Bookkeeping provides accurate financial data for further analysis and interpretation to be performed by accountants. While bookkeeping and accounting are different, they both help businesses manage and control finance in a logical and systematic way. 

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Shoeboxed digitizes and extracts important data from receipts, invoices, and other accounting papers in just one click. With a proven, unique human-verified function, Shoeboxed guarantees every document is scanned thoroughly by a team of data experts to verify and make necessary corrections. 

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