What Is the Difference Between Bookkeeping and Accounting?
Accounting is the process by where a company’s financials are recorded, summarized, analyzed, consulted and reported on. Bookkeeping is the recording part of this process, in which all of the financial transactions of the business (consisting of income and expenses) are entered into a database.
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What Is the Difference Between a Bookkeeper and an Accountant?
An accountant is in charge of assessing and interpreting the financial data of a company, and for reporting on it. An accountant has a higher skill set than a bookkeeper, whose primary responsibility is handling the actual recording of the company’s financial transactions.
An accountant usually has a degree or certification (CPA), and is paid better than a bookkeeper. Typically, a bookkeeper reports to the accountant.
A bookkeeper does not require any formal training, however a bookkeeper’s job is important. The information a bookkeeper is responsible for gathering and managing affects how an accountant will interpret the financial information of the company. Based on this information, the accountant provides recommendations to management or the company’s owners about spending, tax issues or other financial concerns.
What Are the Duties of a Bookkeeper?
The duties of a bookkeeper vary, depending on the company. Here is a breakdown of the responsibilities typically associated with a bookkeeping role:
- Recommend, implement or manage accounting software for the development of a single or double entry system of accounting.
- Recommend, implement and monitor bookkeeping policies and procedures.
- Develop credit and debit accounts, including the assigning of expense categories.
- Enter expenses and income into the software, including non-digital methods of payment such as cash and checks.
- Handle banking activities including new deposits.
- Train staff on the use of relevant bookkeeping software (such as how to enter expenses).
- Verify recorded expenses are within company’s policies, and manage approvals.
- Verify the accuracy of information and that the accounts balance (if a Double Entry system).
- Maintain records, and backup and archive as necessary.
- Assist the accountant in the preparation of financial statements (or depending on the type of statements required, prepare them himself).
- Ensure bookkeeping adheres to accounting best practices and government regulations.
- Assist with audits.
- Flag discrepancies.
A bookkeeper also has a duty to keep the information he processes confidential, as he will be privy to sensitive financial information, including payroll salaries.
What Are the Duties of an Accountant?
The duties of an accountant can be broken down into four areas:
- Data Management
Overseeing how data is stored, managed and updated. For instance, a bookkeeper might recommend the software for a double entry system of accounting, but the accountant would approve it.
- Financial Analysis and Consultation
Properly assessing data and advising management.
- Financial Reports
Being able to generate the standard business reports and statements required by businesses and the IRS.
- Regulatory compliance
Being up to date on government regulations and ensuring the company is following industry standards.
Can Bookkeepers Call Themselves Accountants?
An accountant typically has a degree and relevant work experience, however, there is no formal certification process for becoming an accountant. A bookkeeper could call himself an accountant but it would be inadvisable to do so unless he had the relevant education or some serious working experience that included the various facets of accounting (as listed above).
A bookkeeper cannot call himself a CPA (Certified Public Accountant) unless he achieves the designation. A CPA is earned after completing specific educational and work requirements, and passing an exam. Qualifications for becoming a CPA vary from state to state.
Do Accountants Do Bookkeeping?
Yes, they can and do. Some small companies may not have an official bookkeeper, so an accountant will also take on the responsibilities of a bookkeeper too. Or the bookkeeping duties may be assigned to an accountant with less work experience.