While bookkeeping and accounting are both essential business functions, there is an important distinction. There is often a misconception that bookkeeping and accounting are the same things. Bookkeeping is the collection, sorting, and recording of the financial transactions of a business. The term accounting is much broader, going into the realm of designing the bookkeeping system, establishing controls to make sure the system is working well, and analyzing and verifying the recorded information.
The work of a Bookkeeper and Accountant often overlap. As Bookkeeping is part of Accounting. Accountants build on the information provided by the Bookkeeper.
Bookkeeping, as the word suggests, is about ‘Keeping Books’ and is the first step in the accounting process. An accountant focuses on the bigger financial picture and performs tasks that affect the whole accounting process.
A Bookkeeper keeps an accurate and complete record of the financial transactions of a business. Accountants apply further financial analysis to the financial records kept by bookkeepers. They focus on the recording of financial transactions with less focus on the analysis of these transactions.
The main functions of an accountant include analyzing financial statements, completing income tax returns, and helping business owners understand all the tax and financial regulations that apply to their company. Accountants classify, analyse, summarise, interpret and report on this financial information.
The choice to use a bookkeeper, accountant or both is determined by the size of your company, the difficulty of your operations and financial functions, and the demands of your industry. While the two services go together, only the biggest companies with many daily and complicated financials are likely to need the regular services of a bookkeeper, controller, and a CPA.