While bookkeeping and accounting are both essential to your business and they both deal with the finances, there are some important distinctions. Let’s explore bookkeeping vs accounting.
What is bookkeeping?
The main function of a bookkeeper is to accurately record the financial transactions in your business. Bookkeepers organize and keep a record of all income and expenses, bank and credit card transactions, and assets and liabilities (for example, purchases of equipment or loans).
Bookkeepers also reconcile accounts. This is a process that ensures the accuracy of your accounts. In addition, they prepare internal use reports. These may be reports on your aged receivables and payables, and financial reports such as the Balance Sheet and the Profit and Loss or Income Report. You could not use these reports to secure a loan or to give to your shareholders, though.
Bookkeepers prepare your books and initial reports for your accountant to use.
Good bookkeepers will be able to explain your financial information and provide custom reports to assist you in making daily choices in your business. However, tax planning and important business decisions should be made with your accountant.
What is accounting?
Accountants oversee your accounts, prepare your tax returns, interpret your data and provide advice. In addition, they prepare reports for external users such as shareholders or lenders.
At the end of each financial period, accountants prepare adjusting entries. These adjusting entries make sure your books are in compliance with law, apply depreciation to assets, or in answer to any bookkeeping issues from the year.
Accountants need to maintain a good knowledge of tax laws and ethical issues.
Therefore, the main difference between bookkeeping vs accounting is how often you speak to each one. You will typically meet with your accountant once a year, while your bookkeeper you meet with on a regular basis. Depending on your business needs, this may be weekly, monthly or quarterly.
Ready to work with a great bookkeeper? We would love to meet with you and discuss your bookkeeping needs. Call or email us.