What is the Difference Between Bookkeeping and Accounting

There are different types of business activities that an entrepreneur can undertake. Each of the business activities undertaken by the business include monetary transactions. The entrepreneur would therefore always aim to earn more than the expenses incurred to run any business activity. Communicating financial transactions to other parties is a part of accounting. Both bookkeeping and accounting are used interchangeably in the financial world, however, there is a notable difference between bookkeeping and accounting. Bookkeeping is a part of accounting whereas accounting itself is a wider concept.

We cover the key differences between bookkeepers and accountants so that you understand what service you need and what you can do yourself. If bookkeepers record the cash flow in a business, the accountant makes sure you pay up correctly—especially taxes. Taxation is an important part of business, and you must comply with tax laws https://www.bookstime.com/blog/know-the-basics-accounting-versus-bookkeeping to run your business legally and smoothly. A certified public accountant goes through a rigorous accounting degree and must pass state-mandated licensure examinations before offering services. Because of modern technology, automated bookkeeping software is now available, making it easier for bookkeepers to record your data.

Required credentials for bookkeeping

Data entry can now happen as soon as you snap a photo of a receipt with your smartphone. And reconciliations happen almost in real time through daily bank feed maintenance, making the end-of-month closing process a snap. Now one bookkeeper can manage the bookkeeping for several businesses in fewer than eight hours a day. But note that bookkeeping, while crucial, only covers a part of the vast accounting field.

In this type of accounting, sales that have not been fulfilled yet are also included in the cash flow while also keeping track of expenses that have not yet been fulfilled. A staggering 60% of small business owners don’t feel confident in their knowledge of finances and accounting. So it’s essential to understand the difference between bookkeeping versus accounting to determine which one your business needs. It can be difficult to tell the difference between bookkeeping and accounting for even seasoned online sellers.

Internal management reports

Department of Labor’s Occupational Handbook, some of the most in-demand accounting jobs include comptroller, accounting manager, senior tax accountant, and internal auditors. When a bookkeeper wants to leap to being an accountant, they will need to take the CPA exam, plus earn a bachelor’s degree (most of the time), if they do not have one already. Fifty states plus the District of Columbia require accountants to earn 150 credit hours of college education before taking the national four-part Uniform CPA exam. Accountants and bookkeepers work with numbers and financial data all day long.

Calculating Stripe fees for customer payments is easy with our calculator. Enter the payment amount to calculate Stripe’s transaction fees and what you should charge to receive the full amount. Discover more free Small Business Resources at the Intuit QuickBooks Resource Centre to help grow accounting vs bookkeeping your business in South Africa today. These external reports must be prepared in accordance with generally accepted accounting principles. Whether you sell baseball cards, baseballs, or tickets to a baseball game, your business still needs a bookkeeper or an accountant, or ideally, both.

Should I start with bookkeeping or accounting for my small business?

While these services come at a cost, they can maximize the accuracy and efficiency of vital financial management processes. Accounting is a high-level process that uses financial data compiled by a bookkeeper or business owner to produce financial models. Maintaining a general ledger is one of the main components of bookkeeping.

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. In either case, familiarizing yourself with bookkeeping terms and accounting basics can certainly go a long way toward making the process easier. While having an adequate bookkeeping system in place may be sufficient for many small businesses, it does not diminish the importance of an accountant. Most of the entities nowadays use computers for bookkeeping rather than recording them manually.

Accountants analyze the financial data bookkeepers curate to provide strategic insights and financial forecasts as part of the accounting process. They help business owners understand their company’s past performance, present financial status, and financial trajectory. You may need an accountant to help with tax preparation, budgeting, and forecasting.