Accounting and Bookkeeping… Are They the Same?
One question that comes up quite often is… What is the difference between accounting and bookkeeping? While there can certainly be overlap between the two there are also some general differences that we’ll help explain below.
Bookkeeping
Bookkeeping is the process of recording financial transactions in a journal and posting them to ledgers. Bookkeepers use this information to track a company’s income and expenses and to prepare financial statements.
Bookkeepers are experts in recording numerical information about money coming into and out of companies. They keep detailed records of each transaction so that business owners can use the numbers to make important financial decisions. For example, if a business owner is considering buying a new computer or expensive software that could be advantageous to the business, he or she will need to know how much money the company has available. Bookkeepers help make this possible by tracking all of the financial goings-on within a company.
They also ensure that all financial information is accurate and up-to-date. They typically work with a software program to track income and expenses, as well as assets and liabilities. This information is then used by accountants to review and finalize financial statements and tax returns.
Accounting
Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. Accountants use this information to prepare financial statements, which show a company’s financial condition and performance.
The scope of accounting is broader than the scope of bookkeeping. The information an accountant gathers from business transactions and prepares in financial statements has a broader focus than the individual transactions that bookkeepers track through journals and ledgers. For example, accountants may need to know the financial effects of a company’s long-term contracts for fixed assets, while bookkeepers would not.
Accountants are responsible for interpreting and analyzing all of that information that bookkeepers collect. Accountants also prepare tax returns and analyze and compile reports for those in charge of making financial decisions. They might also be involved in giving advice about how a company can save money or become more profitable.
So, in short, bookkeepers keep track of the money while accountants figure out what to do with it (and assist with taxes at year end). Neither job is more important than the other – they’re just different. And both are essential for any business to continue running smoothly. And companies like Profetti can provide bookkeeping services from a CPA perspective which is the best of both worlds!
Ready to streamline your financial management with expert guidance? Discover how Profetti’s unique blend of bookkeeping and CPA-led advisory services can empower your business decisions. Contact us today to elevate your financial strategy to the next level.
