The Differences Between Accounting and BookkeepingNumbers Pro
Cash flow accountability and management are vital aspects of any business operation.
With the precise recordings of transactions, coupled with correct assessment and processing, a business owner can have a solid foundation from which he or she can make decisions as well as plan their company’s growth.
Recording and comprehending the primary financial needs of any company like expenses, sales and payments isn’t that difficult, but understanding the accounting needs of a company is not a walk in the park.
To understand this better, it’s important to know the difference between accounting and bookkeeping.
The primary difference between the two is that bookkeeper’s record and maintain the everyday financial activities of the company, which are then examined and verified by the accountant.
Basically, bookkeeping is one aspect of accounting, and the latter involves the bigger picture.
The other differences between accounting and bookkeeping are discussed below:
A bookkeeper’s territory lies in the daily financial activities. It involves everyday sales, purchases, expenses and payments.
The process is often done with the help of ledgers and journals.
Some companies ideally use software like Xero, Peachtree, QuickBooks, Sage, etc, to maintain the records.
The effort of maintaining these financial documents concludes with the making of a trial balance sheet that ascertains if the credits and debits match perfectly.
Bookkeepers play a vital role in creating a solid foundation for the company by recording and overseeing the everyday financial information.
Due to the advent of bookkeeping applications, some accounting aspects have merged with bookkeeping activities as most of the applications are able to create financial statements from the daily ledger.
This blurs some of the conventional lines between accounting and bookkeeping.
However, in terms of experience, bookkeepers need to have an associates degree or 2 to 4 years of experience to qualify for the job.
The role of an accountant is to assess and verify financial data generated by bookkeepers so that they can analyse records, create financial reports and conduct audits.
All of this information assists in preparing financial records like income statements, balance sheets and tax returns.
The accountant’s analysis regarding the financial information can ideally provide insight into market trends, cash flow management, business forecasts and growth opportunities.
These specialists look at the bigger scope and decide how to deal with the information and plan future financial management.
Accounting is a process that makes sense of the information compiled by bookkeepers and transforms it into financial models.
Compared to bookkeeping, it’s highly subjective and very transactional. It brings crucial financial indicators together, leading to a better understanding of profitability.
It turns the data from ledgers into statements thus revealing the bigger picture of the business.
Accountants ideally help business managers and owners in strategic and effective tax filing, tax planning and financial forecasting.
For an accountant to qualify for a job, they must have a degree in finance or a bachelor’s degree in accounting.
As you can see, there are various differences between the two, even though bookkeeping and accounting are often used interchangeably.
By knowing the differences, you will be able to run your business better and hire the right people for the tasks.
If you are looking for a blend of truly personal service and expertise, please call us today on 03 9510 2120 or contact us through our website https://numberspro.com.au/contact-us/