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 payroll 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 statement, Balance Sheet, and Cash flow statement.
- They further assist the management to understand 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:
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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 whereas accountants are required to summarise, interpret and communicate the latest financial transactions classified in the ledger account.
- Financial decisions cannot be made exclusively on the basis of bookkeeping records but can be considered on the basis of 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 Accountants as they require the information for making future management decisions.
- The tools used by bookkeepers are Journals and Ledgers and that of accountants are balance sheet, income statement, cash flow statement, etc
- Bookkeepers do not require any special skills since most of the activities are mechanical in nature but accountants require specialized analytical skills due to the level of complexity involved in maintaining the books of accounts. It will require a professional degree in accounting and also some past work experience in the same.
Bookkeeper vs Accountant Comparative Table
|Basis of Comparison||BookKeeper||Accountant|
|Role||Required for identification, classification, and recording of all financial transactions.||Involved in interpreting, summarising and communicating the financial transactions|
|Tools Used||Journals and Ledgers||Profit & Loss, Balance Sheet, and Cash Flow Statement|
|Skills Required||No special skills required||Professional degree in accounts and analytical skills for interpretation.|
|Complexity||Level of complexity is low||Comparatively high level of complexity|
|Financial Decisions||Cannot be made based on book-keeping.||Decisions can be made on accountant’s records.|
|Management Role||Generally, no role is played in the functioning of a bookkeeper.||Management plays an active role since information is required for future decisions.|
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
- Recording, 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 normally require the services of a CPA (Certified Public Accountant) or by multiple Non-certified accountants with oversight of a CPA. Some of the tasks undertaken involve:
- Creation and management of the Chart of Accounts (COA)
- Designing and maintaining of financial statements
- Record of accrued revenue and deferred revenues 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-offs 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 in 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 while 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 –