Bookkeeping vs Accounting: Key Differences You Need to Know

Differences Between Bookkeeping vs Accounting

Introduction - Booking vs Accounting 

Many people have the notion that bookkeeping is the same as accounting; therefore, today, we want to dispel that myth by laying out an in-depth, point-by-point difference between bookkeeping and accounting.

Although both phrases are interchangeable, continue reading to learn how they differ.

The differences between bookkeeping and accounting are subtle. Both of these components of your company are essential for financial management and decision-making. Accounting deals with interpreting, analysing, classifying, reporting, and summarising a company's financial data, while bookkeeping is solely concerned with recording financial transactions. 

Accounting is a subjective examination of what these figures signify for your company's cash flow plans.  Accountants pay closer attention to the overall picture.

Due to the similarities between the two professions, bookkeepers and accountants frequently collaborate. Many of the abilities and skills needed for these professions are quite similar. 

What distinguishes bookkeeping from accounting?

Although subtle, there are significant differences between accounting and bookkeeping.

The following analysis compares the education requirements, abilities needed, and job outlooks for bookkeepers vs accountants. Bookkeeping and accounting are desirable career routes for those who enjoy working with maths and numbers. Learning more about these professions and how they compare will help you make a more knowledgeable choice during your next job hunt.

Basis of distinction Bookkeeping Accounting
Definition Involves systematic maintenance of books of accounts. The process of identifying, measuring, recording, and classifying financial transactions. Recording, organizing, analyzing, interpreting, summarizing, and communicating the entire financial transaction in a methodical manner.
Scope Narrow concept. The integral part of bookkeeping is merely limited to the recording of transactions. Broader concept. Includes bookkeeping.
Preparation of financial statement: Something that is beyond the scope of bookkeeping. Instead, it provides base data for preparing financial statements. The accounting process entails the preparation of financial statements.
Analysis procedure Data analysis is not needed for bookkeeping. Accounting analyses and interprets data using all the information gathered through bookkeeping to create valuable business insights.
Professionals involved: A A person who does bookkeeping is known as a bookkeeper or could be anybody with the requisite skills. Person involved in accounting is known as an accountant. It could be a CPA or a CA of a particular country.
Determination of financial position Does not depict the financial position of the business. Gives out a clear and comprehensive picture of the financial position of a business. Which forms the ultimate step.
Required qualification In bookkeeping, advanced education is not necessary. No formal certification is required. Qualifications like CPA, ACCA, or a CA qualification specific to a particular country would be useful for high-level learning required for comprehending and assessing accounting principles.
Stage The initial phase of accounting is bookkeeping. Since it serves as the foundation for accounting. Accounting utilizes data from bookkeeping and depends on the reliability of that data. It is the second and last phase.
Requisite skills No high level of skills. Basic accounting, data entry, and invoicing skills required. High level of skills including analytical skills, critical thinking, highly technical and problem-solving skills required.
Objective To maintain accurate and detailed records of financial transactions. Determining the company's net results of operations and financial status and informing the interested parties of this information.
Supervision The bookkeeper is not entrusted with the duties of supervision. An accountant checks the work of a bookkeeper.
Period Gives details of financial transactions on a daily basis. Accounting provides information for an entire fiscal year.
Complexity Low level of complexity. Complexity is very high.
Booking v Accountant salary Paid lower than an accountant, depending on the size of the firm, expertise, local market, and services involved. Typically higher than a bookkeeper.
Sub-categories There are three, subcategories at play: Single Entry, Double Entry, and Virtual. And here there are - Management, Financial, Cost, HR, Responsibility
Management role Management cannot base decisions on bookkeeping. In general, management has no input into the operation of bookkeeping. Management participates actively in the accounting process, and information is needed for decision-making in the future.
Roles involved Taking care of employee payroll, Following up on vendor, contractor, and other invoices tracking the payment of bills. Management of the budget and modifications, Taking care of tax returns, and filing, examining, and offering advice on corporate procedures.
Tools used Journals, ledgers, and cash registers. Balance sheet, profit and loss account/income statement, cash flow statement, trading account, etc.
Process involved Identifying a financial transaction,recording a financial transaction, preparing a ledger account, and preparing a trial balance. Recording adjusting entries, financial statement preparation and analysis, building trial balance and ledger accounts, estimating operating expenses, filling out tax returns, and evaluating financial decision-making effects.
Types Single-entry bookkeeping, Double-entry bookkeeping, and Virtual bookkeeping. Financial accounting, Management accounting, Cost accounting, HR accounting, Responsibility accounting, tax accounting, and internal auditing.

Final takeaway

Now that you know the differences between the two, you may choose to hire a bookkeeper or accountant.

Both accountants and bookkeepers are essential to a business's financial health. An accountant can be considered a bookkeeper, but with the appropriate accreditation, a bookkeeper can be an accountant.

Bookkeeper Role

  • Keeps track of an organisation's financial transactions.
  • Manages accounts receivable, accounts payable, and payroll transactions.

Key Responsibilities

  • Recording financial transactions.
  • Overseeing firm accounts.
  • Routinely maintaining accounting systems.
  • Gathering relevant data for accountants.

Relationship with Accounting

  • Both bookkeeping and accounting involve the reporting of financial transactions.
  • While bookkeeping focuses on recording and organising data, accounting provides a comprehensive analysis of financial health.
  • Bookkeeping is foundational to accounting, and the two are interdependent.

Organisational Needs

  • Large corporations often hire both an accountant and a bookkeeper.
  • This separation allows for a more precise understanding of the company's financial situation.

With the help of Inkle Books, which offers Hello to chat-based bookkeeping, both bookkeeping and accounting may be made simple. An easy-to-use chat interface makes transaction categorisation simpler than ever. We have made it a breeze by providing a chat-based accounting platform that syncs with already-existing accounting software to give an integrated ecosystem.

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