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What is the difference between accounting and bookkeeping?

It is not uncommon for people to feel confused when trying to understand the differences between the jobs that accountants and bookkeepers do. For those who run businesses, however, it is worth making sense of those differences in order to employ the right person for the job when it comes to financial affairs.

Bookkeeping concerns the daily running of a business and the recording of financial data. Each transaction is entered into what are commonly referred to as “the books”, which are the business’s financial records. The information entered into the books must then be reconciled with the figures in the business’s bank account. Bookkeeping also involves the production of invoices, as well as the management of the payroll. If the bookkeeper creates monthly management accounts, these can be used to indicate how a business is doing financially over the course of several weeks.

Accounting differs from bookkeeping because it is concerned with the larger financial picture. The books must be kept up to date and checked for accuracy by the bookkeeper, but then they are handed over to the accountant for analysis. Accounting is carried out by highly qualified professionals who interpret a business’ financial data to evaluate efficiency and forecast profit and cash flow. Another important job that accountants do is the auditing of accounts – a process that involves examining and verifying both a business’ accounts and any supporting documents.

Understanding the crucial differences between accounting and bookkeeping enables business owners to choose wisely when hiring experts to help manage their finances. It is essential to use a bookkeeper who can keep your books accurately or your accountant will be unable to analyse them effectively, but a bookkeeper would not be expected to be able to advise you on making the most of your financial assets.

Posted by Peter
September 4, 2014
Features

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