Most people have difficulty explaining the difference between bookkeepers and accountants, and the distinction between the two is becoming more obscure as advances are made in accounting software. However, while both share some common goals, they provide different levels and types of support for your business.
Both accounting and bookkeeping are essential business functions that is required for every business. In general, accounting is responsible for classifying, interpreting, analyzing, summarizing, and reporting financial data, while bookkeeping is responsible for entry of all financial transaction in the financial record. The most significant difference between these two definitions is that bookkeeping does not involve interpreting or analyzing financial data. Here is an examination of both with a bit more detail.
Similarities Between Accountants And Bookkeepers
If you were to observe accountants and bookkeepers at work, there would be very little that would stand out to you to indicate that there is any difference at all between the professions. To the untrained eye, all that would be noticed is that both professions work with financial data, and it is true that there are a great deal of similarities between the two.
To enter either profession, an individual must be familiar with and able to use accounting knowledge. In smaller companies, bookkeepers frequently handle more of the accounting process than just data recording. In addition to recording transactions, they’ll use financial transaction information to classify and generate reports. Often they don’t actually have the educational background to do these things, but this is an area that advances in accounting software is blurring the distinction between the two. Accounting software is capable of automating such reports. In many businesses, accountants will also log financial transactions into the program for a company, something that is typically considered part of the bookkeeper’s half of the accounting process.
Differences Between Accountants And Bookkeepers
Aside from the differences already mentioned regarding the roles that accountants and bookkeepers play in the accounting process, the amount of education to qualify for the positions is probably the largest difference. To qualify as a bookkeeper, it’s generally accepted that an individual only has to have taken a few accounting courses, and can demonstrate a basic understand of accounting principles. To qualify as an accountant, an individual will have to have earned at least a bachelor’s degree from an accredited college or university, to qualify as a certified public accountant, more advanced study is required.
Because of the difference in their level of education, accountants are qualified to handle every step of the accounting process, while bookkeeper’s are only qualified for recording financial transactions. Accountants are often used as advisers to bookkeepers to guarantee their accuracy, which they accomplish by completing reviews of the bookkeepers work. This is not to say that bookkeepers don’t have an important role to play in the accounting process, as they are responsible for laying the groundwork that accountants need to analyze financial data.
The Bottom Line
The two professions work hand-in-hand, to contribute to the long-term success of your business. The bookkeeper organizes the financial records and maintains properly balanced finances, and the accountant builds upon the bookkeepers work by using the data to develop smart financial strategies and to produce accurate tax filings.