Bookkeeper Vs Accountant: Top 10 Differences
Role of Bookkeeper vs Accountant: There can be a blurring of the line between the two job roles sometimes. For example, in the case of small businesses, some bookkeepers take up the part of handling accounts as well. But, this can only be situational either due to resource constraints or any other problems.
On the surface, the two professions, bookkeeping and accounting, may seem similar, but there are indeed significant differences between the two. Let us first understand bookkeeping and accounting as professions.
Bookkeeper Vs Accountant Roles
What Is Bookkeeping?
Bookkeeping forms the first crucial step in the accounting process since bookkeepers lay the foundation for accountants by keeping a record of all the transactions.
Bookkeepers keep a check on finances and track your transactions at a glance. It means they are aware of how much money is going out and how much is coming in or adding value for that matter.
Bookkeeping can, therefore, be defined as a process to record daily transactions logically and persistently. It can be a significant step to run a financially successful business.
The role of a bookkeeper majorly composed of methods like recording transactions, posting invoices, keeping a check on debits or credits, and maintaining invoices.
What Is Accounting?
The accountant uses the above mentioned recorded data to analyze and further report on the financial condition of said business.
Since they are more strategic in their job role and have insights to offer in critical business decisions, one wouldn’t hire an accountant to record expenses and income.
Accounting can, therefore, be understood as a process to analyze and interpret the data compiled by a bookkeeper or a business owner to produce or modify financial business models for the organization.
The role of an accountant involves sub-processes like preparing financial statements for the company, analyzing the cost of operations, and completing income tax returns.
10 Things That Differentiate Bookkeepers from Accountants:
Bookkeeping is clerical and is mostly undertaken by the junior employees in the industry. It is primarily transactional and forms the basis of the accounting system of a particular organization.
Accounting, on the other hand, is subjective. It is thus a broader concept than bookkeeping and deals with enabling stakeholders to get a picture of the financial position of the company at a given point in time.
2. Bookkeeping Vs Accounting Process
The process of bookkeeping involves identifying and recording financial transactions.
Accounting, on the other hand, includes identifying and recording business transactions, preparing ledger accounts and trial balance, preparing and analyzing financial statements.
While bookkeeping has no branches, accounting is known to have branches, including cost accounting, management accounting, and many more.
3. The Difference Of CredentialsTo work as a bookkeeper, one doesn’t need any formal education. You need to be a little alert and quick-witted about essential financial topics. The work of a bookkeeper in most of the organizations is usually overseen by either an accountant or a business owner. An accountant, on the other hand, is required to have a Bachelor’s degree in the field of accounting. In case somebody doesn’t possess one, a degree in finance is considered the best-suited equivalent for the same.
4. Bookkeeping & Accounting ObjectivesThere is a significant difference in the job roles of bookkeepers and accountants. Bookkeepers are mainly required to identify, quantify, record, and further classify the ongoing transactions. Accountants, on the other hand, need to summarize and then analyze the recorded data, interpret it according to the needs of the business, and finally communicate the same in the best interest of the organization to help stabilize the financial health of the company.
5. Managerial Role
Bookkeeping and Accounting comes with another significant difference in the managerial position.
While there can be very little or no bookkeepers in the administrative areas, the top management generally takes an interest in the accountant’s work.
It is precisely because their work has a majorly revolves around making or modifying the financial business decisions based on their analysis of the data provided by the bookkeeping staff.
6. Decision Making
Decision making is the process of choosing the right course of action among a set of alternatives.
In the case of bookkeeping, there is no significant role in decision making, which means it is fine even if the bookkeeper is not decisive enough to reflect on the company’s finances.An accountant, on the other hand, is required to make crucial decisions concerning the financial situation and the overall performance of the company concerning its expenses.
7. AnalyticsBroadly in the field of bookkeeping, there are no special skills required to perform your daily tasks. You can get along with your job very well if you are good with numbers and financial information.
Accounting, on the other hand, requires special analytical skills.
Due to the complex nature of the work involved, accounting uses analytical methods to help identify processes that can increase the efficiency of the organization.
8. Preparation Of Financial StatementsThe preparation of financial statements involves putting all the accounting information into a standardized set of financials. This is mainly done to provide information about the cash flow of the organization, financial position, and result of the ongoing operations in the company. Bookkeepers are not known to create any financial statements, while the preparation of financial statements is a critical part of the accounting process.
9. Usage Of Tools
The main tools required to keep a record of transactions by a bookkeeper are ledgers and journals.
These tools help the bookkeeper in processes like completion of payroll, categorizing financial transactions, producing and sending invoices, and posting debits and credits.
On the other hand, the essential tools required by an accountant are balance sheets, profit, and loss statements, and cash flow statements.
These tools help the accountant to prepare financial statements and offer financial advice thereby.
10. Types Of Bookkeeping and Accounting
Bookkeeping can be of two types majorly, which is single-entry and double-entry bookkeeping. The single-entry bookkeeping system is the kind of bookkeeping where only one part of the transaction is recorded, either debit or credit.
A double-entry bookkeeping system is the one wherein both aspects of the transaction are taken into account.
Accounting, on the other hand, runs on two systems, namely, single-entry system and double-entry system.
Single-entry systems are used by small businesses and can be run even on an excel program.
Double-entry systems are much detailed and require software and generally provide access to several reports like profit and loss statements, invoice summary, payment summary, and expense reports.