Accounting vs Bookkeeping



Accounting vs. Bookkeeping

  • Bookkeeping- is the tedious part of the financial affairs of a business. It involves the systematic recording of the amounts, dates and sources of each revenue and expense transaction.  Bookkeeping is concerned with the systems that enable the financial information to be extracted in the transactions that generate revenue and incur expense in the business. 

  • Accounting - is the bigger picture. It is the system that keeps track of the data, including people, and records the transaction’s history, as well as taking the information that is obtained through the bookkeeping process and using that information to analyse the results of the business.  Accounting is the system that provides the reports and information needed for management to make decisions as to the direction of the business, as well as issues such as taxation, Sales Tax etc.

    Some say you should think of accounting as a giant sifter and of bookkeeping as the process of pouring the stuff into the sifter.  Things get stirred around and you get the information from the sifter after it’s been stirred, in order to run the business efficiently and profitably.

Difference between an Accountant and a Bookkeeper
The old story that the difference between an accountant and a bookkeeper is about $150 per hour is meant to be a joke but it does put a lot of people off.
 
  1. Bookkeeper
    A Bookkeeper is involved with the systematic recording of the financial transactions of your business and the person that is generally responsible for this type of work is known as a bookkeeper. A bookkeeper may not be a fully qualified accountant but it may be someone who has accounting experience in an accountancy office or has basic bookkeeping experience or training. In general, a bookkeeper is concerned with making sure that the transactions of the business are properly recorded and that the data required is extracted in a form ready for an accountant to take for looking at the more complex issues such as taxation, budgeting, forward planning and financial reporting.

  2. Accountant
    An accountant however usually is someone who is qualified in accountancy, through the completion of a university degree or other accountancy qualification. The accountant’s time is best used to analyse the financial data from the business by the bookkeeper. From the analysis of this data decisions can be made as to the direction the business needs to follow. The bookkeeper is therefore responsible for the initial stages of the business transactions and the accountant comes in after that to determine the direction of the business based on the results achieved.

  3. Both are important
    Both bookkeepers and accountants are very important to the business. Knowing the difference between them can assist in making sure you get the best information. It could also save your business thousands of dollars a year in fees as well as avoiding business disasters.