What’s the difference between bookkeeping and accounting?
Posted on 1st February 2023
While bookkeeping and accounting share similarities, there are some important differences.
A question that often crops up when discussing bookkeeping or accounting services is what is the difference between the two?
When you aren’t overly familiar with both bookkeeping and accounting services, it can be difficult to define the distinction between them. While they both serve vital functions within the financial processes of a business, bookkeeping is focussed on recording and organising financial transactions, whereas accounting focuses on interpreting that data, providing insights and projections based on the information provided by the bookkeeping process.
OK, that’s a very simplified overview of the main differences between bookkeeping and accounting, but it’s a good place to start.
Bookkeeping vs Accounting: what are the key differences?
When considering accountancy services, you often see “bookkeeping” listed amongst the services offered but when you compare a bookkeeper with an accountant, there are distinct differences between what is on offer. This is because an accountant can offer bookkeeping services but a bookkeeper cannot be considered an accountant without the relevant qualifications.
Let’s break down the key differences between the tasks that each position is able to do.
What does a Bookkeeper do?
Bookkeeping, when broken down into its simplest terms, is the process of recording a business' daily transactions in a presentable manner. Bookkeepers are responsible for entering financial data into a business’ general ledger or accounting software, reconciling accounts, and producing up to date financial information and statements for the business. Accurate bookkeeping is essential to any business, not just for the day-to-day running of the business, but to ensure your business meets its obligations to HMRC and other legal entities.
Bookkeeping duties:
Record daily transactions made by the business
Produce and send invoices
Record payments received by the business
Produce bank reconciliations for the business
Produce financial statements for the business
Manage payroll
Prepare financial records for accountants
Prepare year-end financial and tax documents for accountants
Maintaining a general ledger for the business
What does an accountant do?
An accountant not only records financial data such as what a bookkeeper may do above, but they also analyse, interpret, and present financial data in a way that allows business owners and managers to interpret it and make informed financial and business decisions. An accountant is able to place a value on a company’s assets and liabilities, give an accurate cash flow position, and forecast future financial performance by understanding trends and variances.
Accountant duties:
Review and analyse financial statements
Perform financial audits
Prepare adjusting entries
Analyse operational costs
Analyse and assess financial health
Produce financial projections and forecasts
Advise key shareholders during financial decision making
File tax returns
Conduct tax planning
Provide advice on tax efficiency and planning
Create financial budgets
Assist in analysis and creation of business plans
Can provide bookkeeping services as above, too
Get both bookkeeping and accounting services with Abaqus!
As you can see, while there are definite overlaps between the two roles, there are also clear differences.
To summarise:
Bookkeeping forms part of the accounting process and is the recording of financial transactions.
Accounting is using the financial data from the bookkeeping process for analysis, planning, and strategy in order to help business owners and managers make informed decisions.
At Abaqus, we can provide a full range of accounting services, including bookkeeping, for you and your business. You can opt for a fully tailored, bespoke accountancy service, or choose from one of our three packages that best suits your business and your needs.
If you’d like to learn more about our services and what we can do for you, get in touch.
Tagged as: Accountant, Bookkeeping
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