Bookkeeping vs Accounting: What Do Your Finances Need?
Choosing between bookkeeping and accounting is a difficult choice. Both share similar goals but they render different types of help at each of the financial levels. For business owners, whether established or a start-up, it is important to know the difference between bookkeeping and accounting.
In this post we will describe bookkeeping and accounting and explain the difference between the two.
What is bookkeeping?
Bookkeeping, as the name suggests is the process of maintaining business records on a day-to-day basis regarding all the financial transactions and the relevant information of the business. Bookkeeping helps to ensure that the provided information is not only up to date but are also correct and financially comprehensive.
Bookkeeping can ensure a degree of accuracy if the business owner chooses it over accounting. It depends on the quality of the bookkeeper and how dedicated they are to their work. In most circumstances a bookkeeper is overshadowed by an accountant.
What is accounting?
Accounting is a systematic process that helps in performing various tasks such as, organising, interpreting, recording, classifying, and various other tasks that relate to the financial information of the business. It will also help in revealing the profit or the loss for a given period of time and also the nature of a certain firm’s assets and liability. Accounting will provide information based on the resources that are available in the business.
Bookkeeping vs Accounting
There are many key differences between bookkeeping and accounting. It is important for small business owners to decide which is best for their needs.
1. Job Role
The bookkeeper will have to identify, quantify, record, and classify all the financial transactions on their own. While doing so there is a risk of errors and mistakes. There are always risks involved in manual data keeping and recording.
In accounting, the owner will just have to summarise, interpret and communicate the latest financial transactions and classify to the ledger account. There are fewer risks involved and it is much faster in comparison to bookkeeping.
The subcategories that are included in bookkeeping are as follows:
- Single entry
- Double entry
- Virtual bookkeeping
The subcategories that are involved in the accounting section are as below:
- Financial accounting
3. Special Skills Required
One of the greatest advantages of bookkeeping is that there is no need for any special skill. This is because most of the tasks are mechanical.
In accounting, there is a need for some analytical skills. This is because accounting can prove itself to be quite complex.
What are certain tasks that the bookkeeping and accounting offer?
There are a certain number of tasks that both, bookkeeping and accounting offer.
- Proper processing of all the receipts, invoices as well as transactions that are related to finance of the business.
- Proper processing and management of the payroll system.
- To prepare the initial statements of the financial transactions.
- To reconcile the accounts and prepare the reconcile reports of the small business as well as well-established business.
- To calculate the GST rates.
- To manage the accounts, which involves the crediting as well as debiting of money?
- To prepare and lodge the BAS.
- To design, establish and review the accounting systems of the business.
- It is more advisory and analytical.
- It will offer financial projections to the owners.
- It will render advice regarding the future financial investments in the business.
- Renders the advice regarding the taxation system and planning accordingly.
- Renders complete assistance if the people needs regarding the establishment of the business.
- It helps in auditing.
- It will also help in completing the income tax returns, which is a boon to small business owners.
- Better for analysing the cost of the business.
- Proper assistance in generating the corporate reports and compliance.
If you are running your business now or planning to start a new business, then it is very important to learn about the difference between bookkeeping and accounting. Both are a great help in business. The major difference between them is the kind of help that they provide at different financial levels.
Businesses must understand that difference and then make their decisions accordingly.
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