Not all accountants are bookkeepers and not all bookkeepers are accountants. Each play a role vital to your business. Both bookkeeping and accounting rely on each other and share a common goal, but the processes for each varies.
Bookkeeping is the process of classifying the transactions that occur within your business. The main function of bookkeeping is to keep consistent records of the daily accounting transactions.
Here Are Some Important Things The Bookkeeping Process Includes:
- Recording financial transactions
- Posting debits and credits
- Creating invoices
- Maintaining and balancing general ledgers and historical accounts
- Completing payroll
Still curious about bookkeeping? Dig in here.
What is Accounting?
Accounting takes the information created through the bookkeeping process to do things like make financial models. The information is analyzed and used to complete filings with tax authorities based on the tax rules and regulations.
Here Are Some Important Things The Accounting Process Includes:
- Preparing adjusting entries (Accounting at it's core is a bunch of journal entries and by the nature of the accounting practices, sometimes it's necessary to enter adjustment journal entries. It's pretty high level stuff if you haven't had any accounting education.)
- Analyzing operational costs
- Preparing financial statements like a balance sheet and profit and loss statement
- Completing income tax returns, sales tax returns and payroll tax returns
- Accountants often help business owner understand the impact of financial decisions. And use the information from the bookkeeping data for tax planning, financial forecasting and strategic planning.
But Sometimes There is an Overlap
The bookkeeping technology that exists today helps blurs the line between the functions of a bookkeeper and your accountant. For example, it's pretty standard that most bookkeeping software can generate financial reports with the touch of a button.
Sometimes your bookkeeper can help you understand your profit and loss statement and how certain financial decisions are impacting your company.
Accountant Vs. Bookkeeper: Know The Roles
As a business owner, it's important to know what role your accountant plays and what your role your bookkeeper plays. You should also have some knowledge about the credentials required for each.
It would behoove you seek out a bookkeeper with an education in accounting. This could be a certificate program, associates or bachelor's degree. A bookkeeper should be detail-oriented and understand basic accounting and financial concepts. Typically a bookkeeper's work is overseen by the business owner and/or the accountant.
It's generally accepted that someone who has a bachelor's degree in accounting is considered an accountant. Sometimes a finance degree is a substitute. Unlike bookkeepers, accountants can obtain additional designations and licenses. The most common is a CPA or certified public accountant. To become a CPA, one must study and pass a grueling accounting examination.
The Language of Business is Numbers
If you're in business, you understand the language of business is numbers. You understand what your definition of success is. Two aspect of your business that impact your success are good bookkeeping and accounting practices. So if you have both a bookkeeper and accountant, it's important that your bookkeeper and your accountant have a good working relationship. If you as the owner manage the finances, it's important to be in communication with your accountant. Your accountant will help you analyze how your business has done and informs you on how to navigate into the future.