How is a bookkeeper different to an accountant?
Often bookkeeping and accounting are considered to be the same profession.
Although they seem to have very similar roles and work there are some major differences between the two.
The real value of any business is achieved when both work closely together.
What is the difference between Accounting and Bookkeeping?
Bookkeeping is the day-to-day process of accumulating, categorizing, and recording financial transactions.
Bookkeeping is a foundation of your finances, providing vital information for reports, financial statements and tax returns.
The main objective of bookkeeping is to keep all financial transaction records up to date in a proper and systematic manner.
Bookkeepers are often responsible for:
- Data entry
- Balancing bank ledgers
- Preparing bank reconciliations
- Tracking income and expenses
- VAT returns
- Maintaining the general ledger
- Completing payroll
- Producing monthly financial statements and reports (e.g. profit and loss reports)
Accounting is the process of:
- Recording
- Measuring
- Classifying
- Verifying
- Summarising
- Analysing
- Interpreting
And communicating financial information compiled during the bookkeeping process.
Accounting produces:
- Conclusions
- Reports
- Forecasts
- Financial statements
- Tax returns
Strategies and models that can be used by business managers to make key business decisions.
As a result, it provides a picture of the actual profitability, trends, cash flow and other key financial indicators.
Put simply: Bookkeepers produce the data, while accountants review and interpret reports, providing insights into the business.
Similarities
- Bookkeepers and accountants both work with financial data.
- Working with small businesses bookkeepers’ and accountants’ roles sometimes overlap, as bookkeepers can generate financial reports through bookkeeping software.
- Both are tax-compliant.
- Both share a goal of improving your business’s financial health.
Differences
Bookkeeper:
- Records and classifies all financial transactions
- Processes receipts, payments and other financial transactions
- Processes sales and purchase invoices
- Maintains and balances subsidiaries, general ledger and historical accounts
- Reconciles bank statements
- Track income and expenses for the tax periods
- Prepares initial financial statements
- Manages accounts receivable and accounts payable
- Prepares and files VAT returns
- Can also facilitate payroll
Accountant:
- Analyses/interprets, and provides subjective advice based on data from the bookkeeper
- Adjusts entries
- Generates financial statements and reports
- Files income tax returns
- Submits annual accounts
- Advises on tax strategy and tax planning
- Prepares financial forecasts
- Analyses business performance
- Prepares budgets, business plans and cash flow forecasts
- Provides financial management advice
- Audits
A bookkeeper’s and accountant’s work can overlap.
But in general, a bookkeeper’s priority is to record transactions and keep them organised whilst accountants provide consultation and analysis, and often are more qualified to advise on tax matters.
When deciding if you need a bookkeeper you’ll need to review the benefits, as it might be more beneficial for you to concentrate on your business and hire a bookkeeper to look after your day-to-day finances.
A bookkeeper can also liaise with the accountant for you to allow you to focus even more on your business.
In summary, bookkeeping is the completing of day-to-day financial tasks and accounting is the analysing and summarising of information produced by a bookkeeper.
Both have a big role to play in the business and together bookkeepers and accountants can help you better understand your business and take it to the next level.
Find out more
Ensure your business is in safe hands by leaving your bookkeeping to your nearest Rosemary Bookkeeping expert.
Whether you want a helping hand and advice or to outsource your books, your local professional can help.
To learn more about how we can help you manage your finances and avoid bookkeeping woes, call 0345 862 0072 today.
