Accounting is not only the systematic recording of financial data but also the analysis, interpretation, and presentation of this data. Think of bookkeeping as the first step in the holistic accounting process, preparing your business accounts for more complex tasks. A bookkeeper must catch tiny or hidden mistakes because even small ones can affect your business. The complexity of a bookkeeping system often depends on the size of the business and the number of transactions completed daily, weekly, and monthly.
The accounting process is more subjective than bookkeeping, which is largely transactional. The Generally Accepted Accounting Principles are standards of accounting developed by the Financial Accounting Foundation’s standard-setting board. They are often used to help set standards for financial reporting, and to allow https://www.bookstime.com/ for ease of assessment when it comes to someone, such as an investor or lender, offering resources to a given company. While it can be reassuring to see letters after an individual’s name, we recommend focusing instead on finding an accountant who offers the services you need, you feel comfortable with, and trust.
How to decide if you need a bookkeeper or accountant
On the other hand, accountants take on more high-level responsibilities, such as financial planning, business strategy, and advising on a company’s financial decisions. In many cases, they work closely together, with the accountant overseeing the bookkeeper’s work. Bookkeeping focuses on the day-to-day financial activities and transactions of a business. All the financial transactions such as payment of taxes, sales revenue, loans, interest income, payroll and other operational expenses, investments, etc., are recorded in the original books of accounts.
These complementary allies will help keep track of your business expenditures, income, and profits as well as set you up for success once tax time rolls around. While accounting is similar to bookkeeping in that it involves documenting business financial transactions, the former process is more in-depth. It involves the summary, analysis, and interpretation of financial data. A bookkeeper keeps track of day-to-day business finances, like recording transactions and managing general ledgers.
Difference Between Bookkeeping and Accounting (PDF)
If all you need is to set up a financial record-keeping system for your new location, you can hire a bookkeeper. Some of them can produce financial documentation solutions that far surpass those you’d get from a typical accountant. While an accountant can fulfill bookkeeping vs accounting several roles, every business may have unique requirements. Hence, it’s best to inquire about an accountant’s skill set before hiring them. For example, a car manufacturer aims to save two percent on car production costs over the course of the next fiscal year.