The Difference Between Bookkeepers and Accountants?
The terms “bookkeeper” and “accountant” are frequently used interchangeably; nevertheless, while the work that they conduct may at times overlap in certain respects, there are also some very distinct differences between bookkeepers and accountants. The combination of the two responsibilities may have a sizable influence on the achievements of your company.
The owner of any successful firm needs to maintain comprehensive and up-to-date financial reports and records of all business activities. This enables the owner to make informed decisions regarding the direction of the company at any given time, which can be supported by an accurate cash flow statement. If a bookkeeper is responsible for maintaining records of all business transactions and an accountant is responsible for interpreting and analysing those records, which of these two professionals is necessary for your small business, or do you require the services of both? You are going to learn in this article what distinguishes a bookkeeper from an accountant, as well as which one your company should hire and when you should engage them.
Who is a bookkeeper?
A person who is responsible for monitoring and recording the daily financial activities of a company is known as a bookkeeper. Keeping a complete and accurate record of these transactions includes keeping track of expenses, purchases, invoices, sales income, receipts, receipt books, cash receipt journals, payroll taxes, and payments. After this information has been gathered over a predetermined period, the data is then used to develop financial reports and statements, which provide business owners with an understanding of the state of their company’s finances at that moment. Bookkeepers demonstrate how much money is flowing into the firm, where it is coming from, as well as how much money is moving out of the company, and where it is going.
Bookkeepers often follow a procedure that begins with the recording of transactions in a general journal, followed by the classification of those transactions in a general ledger, and finally the generation of financial statements and reports that reflect what these numbers signify for the company. Bookkeepers are at the forefront of laying the groundwork that lays the framework for business owners or accountants to have the resources they require to develop budgets, recognise trends, and plan for the future. Bookkeepers are essential members of a corporation since they are responsible for maintaining the organisation of the company’s financial records. They are responsible for collecting, organising, and storing a company’s financial records.
Who is an accountant?
A professional who is in charge of maintaining and analysing a company’s financial records is referred to as an accountant. Most accounting jobs involve the completion of a diverse array of responsibilities relating to financial matters. These jobs can be completed for individual clients or for bigger firms and organisations that employ accountants. It is common practice to discuss several other topics in conjunction with the term “accountant,” which might result in confused responsibilities in this line of work.
Accountants normally acquire at least a bachelor’s degree in accounting, and they are entrusted with evaluating financial information rather than simply receiving it. This is because accountants are responsible for managing a company’s finances. To summarise, those who work in accounting can also keep books, although not all bookkeepers work in accounting. In addition, a certified public accountant, or CPA, is an accountant who has both passed the Certified Public Accountant exam and fulfilled the requirements for a state licence. Therefore, all Certified Public Accountants (CPAs) are also accountants, but not all accountants are also CPAs.
Accounting is a generic phrase that refers to a wide variety of jobs and responsibilities that can be found in different types of businesses. There are three primary categories of accountants: public accountants, management accountants, and government accountants. Each of these types of accountants focuses on a distinct part of the accounting profession. There is also a strong connection between internal and external auditors.
Duties of a Bookkeeper
The functions of a bookkeeper and an accountant are completely distinct from one another. Daily, the financial records of an organisation’s transactions are kept up to date by a bookkeeper. This comprises records of sales, receipts, and purchases as well as payments and sales. Bookkeepers’ primary responsibility is to record and monitor the flow of all cash through an organisation, both incoming and outgoing.
A bookkeeper is responsible for recording financial transactions, posting debits and credits, generating invoices, managing payroll, and maintaining and balancing ledgers and accounts. They cooperate with the accountants even though their positions are distinct in the organisation. The information gathered by the bookkeeper is taken a few steps further by the accountant, who analyses the financial data that has been recorded, makes adjusting entries, generates predictions, searches for company patterns, prepares financial statements and tax returns, does audits, and generates reports.
Duties of an accountant
An accountant is in a position to offer financially sound advice to business owners because he or she has access to all of this information, which has been compiled in financial statements and reports. This includes the current financial state of your company, what it means for your company, and what, if anything, you should do about it. When performing the analysis and interpretation of the recorded financial data, an accountant is expected to adhere to the accounting profession’s established norms, rules, and regulations. To report on a company’s financial performance and conditions, the accountant is responsible for completing activities such as;
1. Analysis of transactions in the financial sector
2. A synopsis of the financial statements and operational records
3. Analysis of the data on finances Classification of the information under consideration
4. The synopsis of the economic performance
5. Providing information about the current financial state of the company
Other types of professionals who work in the field of accounting include certified public accountants and tax accountants.
Bookkeeper credentials
Bookkeepers, on the whole, are not needed to have any certain level of formal education. Bookkeepers have to be perfectionists when it comes to accuracy and well-versed in all aspects of finance if they want to be successful in their careers. Typically, the work of the bookkeeper is supervised either by an accountant or by the owner of the small firm whose records are being done by the bookkeeper. Therefore, a bookkeeper cannot legitimately use the title “accountant.”
Accountant Credentials
In most cases, an individual is required to get a bachelor’s degree in accounting to be eligible for the position of accountant. Degrees in finance are frequently regarded as a sufficient substitute for accounting degrees for individuals who do not possess an accounting degree specifically. In contrast to bookkeepers, accountants can pursue further professional qualifications if they so choose. Bookkeepers cannot. For instance, accountants who have worked in the field long enough and completed the necessary coursework can get the distinction of Certified Public Accountant (CPA), which is one of the most frequent sorts of accounting certifications. To earn the designation of Certified Public Accountant (CPA), an individual first needs to demonstrate their competency on the Uniform Certified Public Accountant Examination and then demonstrate their experience working in the accounting industry. The price of an accountant is mostly determined by the necessary credentials that must be held by the candidate.
Key differences
- Bookkeepers are responsible for recognising, quantifying, recording, and finally categorising monetary transactions. On the other hand, accountants have the responsibility of summarising, interpreting, and communicating the most recent financial transactions recorded in the ledger account.
- It is not possible to base choices about finances just on bookkeeping records; however, it is possible to take into consideration information from accountant records.
- Bookkeepers are not obligated to produce financial statements, but accountants are liable for the preparation of such documents.
- In most cases, higher-level management does not get engaged in the day-to-day activities of the bookkeepers. On the other hand, because they require the information to make future management decisions, they would take an interest in the work that the accountants were doing.
- Journals and Ledgers are the tools that are utilised by bookkeepers, whereas the Balance Sheet, Income Statement, Cash Flow Statement, and other similar documents are utilised by accountants.
- Bookkeepers don’t need any specialised training because the majority of their work is done with machines. Nevertheless, due to the intricacy of the work involved in keeping the books of accounts, accountants need to have specific analytical skills. A professional degree in accounting and some previous work experience in the field are both prerequisites for this position.
What is the hourly rate difference between a bookkeeper and an accountant?
The fee charged by an accountant or bookkeeper is determined by several different criteria. These include the amount of work that needs to be done, the level of competence that is required, the state in which the job is being performed, and the question of whether the fee will be a flat price for a particular service or an hourly rate. The Bureau of Labor Statistics of the United States estimates that the national average hourly rate for bookkeepers in the year 2021 was $21.90, while the average hourly rate for accountants was $37.14 per hour. Because of their extensive schooling and, if they hold a CPA designation, their certification, accountants command a higher salary.
What is the salary difference between a bookkeeper and an accountant?
The various elements that go into determining their remuneration are comparable to those that go into determining the hourly rate that bookkeepers and accountants charge. The level of education, certification, years of experience, credentials, industry or company, job description, location, and level of difficulty of work are the most common factors that determine salaries. The Bureau of Labor Statistics of the United States estimated that the national average income for bookkeepers in 2021 was $45,560, while the average compensation for accountants was $77,250. Once more, education level and professional qualification are factors in the range of possible salaries.
Similarities between a Bookkeeper and an Accountant
Bookkeeping and accounting could look fairly similar to the average person because there aren’t very many key differences between the two. When beginning a career in either bookkeeping or accounting, having a foundational understanding of accounting is essential preparation. Some small and medium businesses may hire just bookkeepers who are capable of handling accounting processes.
Bookkeepers of this type take on tasks that often fall within the purview of accountants, such as the generation of financial reports and the classification of various types of transactions. The corporation might not require the assistance of anybody other than an accountant, particularly in cases when accounting software has remembered transactions and automated report generation. To get started with the accounting procedures, such an accountant will need to develop bookkeeper skills and begin the recording processes for transactions.
When Should You Hire an Accountant or a Bookkeeper?
The use of a bookkeeper and an accountant is necessary for certain types of businesses and the level of financial expertise possessed by certain types of small, medium, or big business owners. Although a bookkeeper should maintain track of everyday transactions, an accountant’s role in the decision-making process of a business is essential when conducting periodic financial evaluations. Determining whether or not the expert knowledge of a bookkeeper or an accountant is required, either singly or jointly, will rely on several different aspects, including the following:
- The kind of business that the company is engaged in
- The scope of the inventory that the company maintains
- The number of people working for that company
- The many different types of services that are provided by that business
- The level of skill that is utilised by the organisation in its operations
- Whether or not the company needs external financial help
- Find a qualified bookkeeper or accountant.
During the early phases of a company’s development, business owners and entrepreneurs need to have access to the assistance of financial service providers such as bookkeepers and accountants. When all of the information is available, only then can appropriate judgments and plans be formulated, which eventually results in savings in both money and time. When they should be concentrating on the company itself, employees of a small or medium-sized corporation should not be expected to spend time looking over financial figures.
Even if they are well-trained and have a lot of experience, simply hiring a bookkeeper won’t be enough to help your company succeed. A bookkeeper can be unaware of certain tax documents that need to be filed within certain deadlines to avoid incurring penalties from the relevant revenue authorities. When determining whether to engage a bookkeeper or an accountant, it is critical to have a solid understanding of the requirements of the company. The amount of money that is readily available for expenditure is another potential deciding factor. Some small business owners choose to keep their books and only hire an accountant when they need help with tax preparation or other complex financial tasks that require the knowledge of a certified public accountant or tax accountant.
Conclusion
To effectively manage the financial aspects of your company, you need to have a solid understanding of the differences between accounting and bookkeeping. Bookkeeping is concerned with the specifics of your financial data, such as ensuring that your transactions are recorded correctly and that your financial statements are up to date. Accounting, on the other hand, is concerned with the overall picture of your financial situation. You might need the assistance of an accountant when it comes to doing your taxes, creating a budget, or making projections. Depending on the size of your business, its rate of growth, and how comfortable you are working with numbers, it may be worthwhile to invest in the services of a bookkeeper, an accountant, or both to secure the financial success of your company.
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About the Author / By Kaleem Ulah
