We are frequently asked this question – “What’s the difference between bookkeeping and accounting?”
So, to answer the question “What’s the difference between bookkeeping and accounting?”. If we look at bookkeeping first as it is in essence part of the larger topic of accounting. Bookkeeping is the task of recording basic accounting transactions. For example:
- Sending invoices to customers
- Receiving and recording invoices from suppliers
- Recording cash receipts from customers
- Supplier payments
- Updating inventory records
- Payroll processing
- Dealing with petty cash transactions
These accounting transactions are standard in their process – that is, the bookkeeper follows a prescribed set of procedures on a regular basis to record these common accounting transactions. These bookkeeping tasks are completely acceptable for the accounting needs of a small business.
A bookkeeper could deliver financial statements from the transactions as described. However, those financial statements to some extent would be not be complete, because they would not include the following additional tasks that are usually handled by an accountant:
- Accrual or deference of expenses
- Accrual or deference of revenue
The wider scope of accounting includes the use of these accruals, plus it tackles the following activities:
- Delivering the chart of accounts
- Set up of the general ledger
- Design of the financial statements
- Issue of management reports (to address specific business issues)
- Amendments to classification of transaction to meet accounting standards
- Budget creation and comparison against actual results
- Delivering tax returns from the financial data
- Delivering a set of controls from within which the financial system operates
- Designing the record keeping, archiving and document disposal system.
Typically, there is at least one trained accountant who is responsible for the accounting operations of a medium to large-sized business, and it is their responsibility to set up the procedures and tasks that are then followed by a team of bookkeepers.
In short, the difference between bookkeeping and accounting is that bookkeeping focuses on the regular business transactions, and is one part of a larger set of tasks that is accounting.
The role of a bookkeeper is broad, with one person typically handling all of the accounting transactions for a small business. The bookkeeper is normally very experienced, but more often than not has not qualified in formal accounting training. You will often find bookkeepers advertising in local magazines and they are typically individuals who work from home providing their services for a number of small businesses. Many bookkeepers also partner with accountancy firms, so that they can hand over the more technical accounting requirements to a qualified accountant for the needs of the business.
At Maze Accountants, we can provide Bookkeeping services and Accountancy services and we are also happy to partner with bookkeepers who need the skills of a qualified accountant.
If you are a local bookkeeper and wish to partner with a local accounting firm, or you would like the services of a bookkeeper for your business, please contact us on 020 8643 9633 for a no obligation chat.
