Difference Between Bookkeepers and Accountants
The key difference between bookkeeper and accountant is that bookkeeper is responsible for performing the bookkeeping activities in the company where financial transactions are recorded in a systematic manner, whereas, Accountants are responsible for accounting of the financial transactions that have occurred in the past by the company as well as reporting the financial affairs of the company which shows the clear financial position of company.
A bookkeeper is a person without a college degree in accountancy who is responsible for the data entry tasks. Some of the tasks included are:
- Entering bills from Vendors
- Payment of bills
- Preparation of Sales invoice
- Mailing of statements to customers
- Processing payrollPayrollPayroll refers to the overall compensation payable by any organization to its employees on a certain date for a specific period of services they have provided in the entity. This total net pay comprises salary, wages, bonus, commission, deduction, perquisites, and other benefits. data
An accountant will hold a professional degree in accounting and continue the operations performed by the bookkeeper. Some examples are:
- Adjusting entries for recording expenses not yet entered by the bookkeeper (e.g., Interest on bank loans since the last bank payment, wages earned by employees to be processed following week)
- Preparing financial statements of the company such as Income statementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements., Balance Sheet, and Cash flow statement.
- They further assist the management in understanding the financial impact of its past and future decisions.
Bookkeeping Sub Category:
- Single-entry book-keeping
- Double-entry book-keeping
- Virtual book-keeping
Accountants Sub Category:
- Financial accountingFinancial AccountingFinancial accounting refers to bookkeeping, i.e., identifying, classifying, summarizing and recording all the financial transactions in the Income Statement, Balance Sheet and Cash Flow Statement. It even includes the analysis of these financial statements.
- Management accounting
- Cost accountingCost AccountingCost accounting is a defined stream of managerial accounting used for ascertaining the overall cost of production. It measures, records and analyzes both fixed and variable costs for this purpose.
- HR accounting
- Responsibility accountingResponsibility AccountingResponsibility accounting is a system of accounting where specific persons are made responsible for the accounting of particular areas and cost control. In this type of accounting system, responsibility is assigned based on a person’s knowledge and skills.
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Bookkeeper vs. Accountant Infographics
Let’s see the top 7 differences between Bookkeeper vs. Accountant.
- Bookkeepers are required for identifying, quantifying, recording, and eventually, classification of financial transactions. In contrast, accountants are required to summarise, interpret, and communicate the latest financial transactions classified in the ledger account.
- Financial decisions cannot be made exclusively based on bookkeeping records but can be considered based on accountant records.
- Bookkeepers are not required to create financial statements, but accountants are responsible for preparing for the same.
- The senior management generally does not get involved in the functioning of the bookkeepers. However, they would take an interest in the work of the AccountantsWork Of The AccountantsAn accountant is a finance professional responsible for recording business transactions on behalf of a firm, reporting the firm’s performance and issuing financial statements. Thus, an accountant plays an important role whether it is a small domestic entity or a large multinational company. as they require the information for making future management decisions.
- The tools used by bookkeepers are Journals and Ledgers, and that of accountants are the balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company., income statement, cash flow statement, etc
- Bookkeepers do not require any special skills since most of the activities are mechanical. Still, accountants need specialized analytical skills due to the level of complexity involved in maintaining the books of accountsBooks Of AccountsThe best accounting books are - Accounting made simple: accounting explained in 100 pages or less, A brief history of economic genius paperback, Accounting all-in-one for dummies, Accounting handbook (Barron’s accounting handbook), The tax and legal playbook: game-changing solutions to your small.. It will require a professional degree in accounting and also some past work experience in the same.
Bookkeeper vs. Accountant Comparative Table
Though on many occasions, the terms of bookkeeping and accounting are used interchangeably, the activities conducted by them have their own set of differences, which we shall analyze. The activities of book-keeping consist of:
- Preparation and sending of invoices to vendors and customers
- Recording of payments from the consumers
- Record, Processing, and payment of invoices from suppliers
- Recording and monitoring of inventory changes
- Processing payroll and petty-cash transactions
- Categorizing of credit card and other related expenses
- Monitoring of late payment and accordingly sending reminders to the impacted parties
The accountants require a higher level and specialized tasks that generally require the services of a CPA (Certified Public Accountant) or by multiple Non-certified accountants with oversight of a CPA. Some of the functions undertaken involve:
- Creation and management of the Chart of Accounts (COA)The Chart Of Accounts (COA)Chart of Accounts (COA) is a list of all the accounts in which a business records its regular operational expenses. It is used to collect information for preparing a Company’s financial statements.
- Designing and maintaining of financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.
- Record of accrued revenue and deferred revenuesDeferred RevenuesDeferred Revenue, also known as Unearned Income, is the advance payment that a Company receives for goods or services that are to be provided in the future. The examples include subscription services & advance premium received by the Insurance Companies for prepaid Insurance policies etc. and expenses
- Creating a budget and making comparisons against Actual expenses incurred
- Determining estimated taxes and preparing tax documents accordingly
- Keeping on issues relating to Financial and Tax compliance and take actions accordingly
- Identification of potential tax write-offWrite-offWrite off is the reduction in the value of the assets that were present in the books of accounts of the company on a particular period of time and are recorded as the accounting expense against the payment not received or the losses on the assets. or other profit-maximizing opportunities.
The hiring of an individual to conduct these activities could have conflicting views. Many times, small businesses may have the book-keeping tasks completed in an unprofessional manner forcing the CPA to spend more time catching up these activities before progressing ahead. It is also preferred to have in-house bookkeepers who are professionally trained, giving the comfort level to the accountants.
For reducing the costs and maximizing the effectiveness, the firm must make sure they are using the same standardized methods and best practices. They should also be encouraged to communicate regularly and clearly. They should be made to work as a team instead of creating any barriers.
Ensuring the financial records are correctly organized, and finances are balanced out by the bookkeeper coupled with smart financial strategy and timely tax filing of the accountant, directly contributes to the long-term success of every business.
Certain business owners manage their finances on their own. In contrast, others may opt to hire a professional so that they can focus on sections of the business they are interested in. Either of the options will help in their business to grow. Additionally, with the advent of technology, multiple softwares are getting updated for executing the tasks automatically. This aspect will change the definition and requirements with passing time, and hence one is required to be updated with the same.
This has been a guide to bookkeeper vs. accountant. Here we discuss the top differences between bookkeeper and accountant with infographics and comparison table. You may also have a look at the following articles for gaining further knowledge in Basic Accounting –