It’s difficult for most people to identify the prominent differences between bookkeeping and accounting. The two have common objectives and goals and work with financial data, use accounting knowledge and produce reports using financial transactions. Although there may be an overlap in some of their responsibilities, bookkeeping and accounting have significant differences that are important to know when seeking either service.
As a business owner, we understand that navigating through this process can be frustrating. That’s why Padgett Business Services has put together a guide for you on the differences between bookkeeping and accounting.
What Is Bookkeeping?
Bookkeeping is essentially the duty of taking down daily transactions in a consistent manner by measuring and marking down financial transactions. Bookkeepers also invoice their clients, pay bills and process payroll routinely. Controlling the general ledger is a primary function of the bookkeeper. The general ledger is essentially a summary of all financial information for your business and gives a client one place to review each of their transactions.
The role of the bookkeeper is to keep your business’s financial information systems and in check. The bookkeeper is aware and dedicated to their client’s business finances, but not the client’s personal finances. What are the additional obligations of a bookkeeper?
- Recording any payments they receive
- Paying bills from vendors
- Sending out bill’s for the client’s services and/or products
- Do not require formal education, but should be detail-oriented and possess strong math and computer programming skills
What Is Accounting?
Accountants apply their knowledge of accounting theory to their practice to interpret, summarize and communicate financial information, which is classified in the general ledger account. They play an advisory role with their client’s and in addition to providing financial transactions and reports, they also provide their clients with insight into the overall health of their business monthly or quarterly. An accountant’s knowledge is not limited to the client’s business finances solely, but often their personal financial situation as well. The role of accounting is continuously progressing and transitioning into other duties, including roles in tax coaching, tax resolution and financial planning. What are the additional obligations of an accountant?
- There are four different Canadian accounting designations, including the Chartered Accountant (CA), Certified General Accountant (CGA), Chartered Management Accountant (CMA) and the Chartered Professional Accountant (CPA).
- A CPA can perform audits for their client and produce certified financial information using mid-level accounting practices.
Which Service Do You Need For Your Business?
Choosing between a bookkeeper and an accountant depends on your business and the level of expertise you require. Here are some questions to ask prior to making your decision:
- How large is your company’s inventory?
- What is your budget?
- What is the level of expertise you require?
- What industry is your company in?
Whether you decide bookkeeping or accounting is your most viable option, Padgett Business Services is your one-stop business for both! With over 40 years in the industry, we are highly skilled, knowledgeable and effective in managing finances for businesses both large and small. Need our help? Book a free consultation with us online to learn more about our services and how we can help you.