Accounting and bookkeeping are two different types of work, but they’re often confused with another. They are both crucial components of managing your business finances. Simply described, bookkeeping is more transactional and administrative in nature, focusing on the documenting of financial transactions. Using data from bookkeeping, accounting provides you with more individualized insights into the financial health of your company. Here’s a simple guide to help you understand the difference between accounting and bookkeeping.
What is bookkeeping?
Bookkeeping is the process of recording financial transactions, expenses, and income. It ensures that all transactions are accounted for in the correct manner. The term bookkeeper refers to any person who maintains books or records of financial information.
Bookkeepers may also be called accounting clerks or accountants (notably in countries where these terms are used interchangeably). In Australia, an individual’s title can be “sales assistant” if they perform clerical duties related to sales but not provide direct support for customers; however this title does not imply that they have been trained as a professional accountant.
The functions of bookkeeping
The technique of consistently recording everyday transactions is known as bookkeeping. It is a component of accounting and clerical work that includes the following:
- Completing payroll
- Posting credits and debits
- Producing invoices
- Maintaining current account and ledgers
- Recording business transactions
What is accounting?
Accounting is the process of recording, classifying and summarizing financial transactions. It includes the recording of an organization’s assets, liabilities, revenues and expenses. Accounting is used by businesses to maintain accurate records about their operations so that they can make informed decisions with regard to their future activities.
Accounting differs from bookkeeping in that it focuses on the balance sheet (assets against liabilities), whereas bookkeeping focuses on items such as payroll or sales figures which contribute directly to net profit or loss at a particular point in time.
The functions of Accounting
Unlike bookkeeping, which is mostly transactional, accounting is a high-level function that leverages financial data gathered by a bookkeeper. It includes;
- Reviewing company financial statements and reports
- Preparing budgets
- Completing income tax returns
- Analyzing business performance
How often do I need to hire an accountant or bookkeeper?
If you have a small business, you may only need to hire an accountant or bookkeeper once a year. However, if your company has been around for many years and has grown significantly in size (and therefore needs more financial management), then it is likely that hiring an accountant or bookkeeper more frequently will be required.
Why use a professional for my books?
If you’ve been running your own business for a while and feel like accounting is weighing down on your success, there may be a lot to be said for outsourcing the job.
Accountants and bookkeepers can help you understand your numbers. By having someone who knows what they’re doing look over them, it’s easier to spot problems and make sure everything is in order before taking action or making any big decisions.
You can focus on the business instead of accounting: When things are looking good financially (or at least as good as they possibly could), it’s tempting to take some time off from worrying about how much money has been spent on invoices or other financial records related with running a company—but remember that this isn’t just about making sure everything looks good; if nothing else then just keep track of expenses so there aren’t any surprises down line once taxes come due!
The best way for business owners to understand the difference between accounting and bookkeeping is by looking at how each works.
bookkeeping is by looking at how each works. Accounting is a process that records, summarizes, and reports financial information. Bookkeeping is the manual process of recording and summarizing financial transactions. Bookkeeping can be considered a subset of accounting because it involves collecting data from various sources (such as bank statements) into one place so that it can be analyzed by an accountant or other professional who understands what they’re doing.
Accounting software allows accountants to collect all their client’s data into one central system so they don’t have to manually enter any information—they simply click on an icon on their computer screen and those details are automatically entered into a spreadsheet or database program like QuickBooks.
How does Brisca make accounting easier for business owners and companies?
Bookkeeping and accounting are both important for business owners. However, they serve different purposes, and one is not better than the other. Every firm will succeed over the long term if it has well-organized financial records, correctly balanced finances, sensible financial planning, and precise tax filing by both the bookkeeper and accountant.