The difference between bookkeeping and accounting is a thin but remarkable line of difference between bookkeeping and accounting. To understand the difference, you have to have read the following writing. Here we are going to discuss the differences between a bookkeeper and an accountant. The persons who do not have any idea about running a business get confused between bookkeeping and accounting. Bookkeeping is a prerequisite to accounting. To understand the difference, we have segmented our writing according to the following bullets.
- Definition of bookkeeping and accounting.
- Role of a bookkeeper and an accountant.
- The functional difference between bookkeeping and accounting.
- Prerequisites to become a bookkeeper/ accountant.
- Can one replace another?
Contents
Definition of bookkeeping and accounting
Bookkeeping:
Bookkeeping is a systematic way of recording the financial activities of any business with proper documentation following accounting principles. It requires simply inputting the daily financial activities in a systematic pattern to meet the demand of business.
Bookkeeping does not work on subjective data. It only works with methodical input of data. It requires less theoretical knowledge than accounting.
Accounting:
Accounting is a process of processing data came through bookkeeping to define your business status. This processing includes interpreting, analyzing, summarizing, and reporting the financial data input through bookkeeping. By using the process “Accounting,” you can obtain the periodic financial statements of your business. It enables you to find the current status of your business by looking at the income statement, balance sheets, cash flow statement, etc. Accounting is essential to represent your business’s health to its stakeholders. Stakeholders weigh a business through the financial statements provided to them by the accountants.
Role of a bookkeeper and an accountant:
The definition says it all. A person who does bookkeeping is called a bookkeeper. On the other hand, one who learns and applies to an account is called an
accountant. They are part of the same business but with distinct roles. Their roles can be defined as follows:
Role of a bookkeeper:
- Do single entry or double entry based on company policy.
- Input debit and credit entries to relevant accounts.
- Do software-based input if the company has access to bookkeeping
- software.
- To preserve the relevant documents according to entries.
- Assist an accountant to prepare financial statements.
- Verify the accuracy of any accounts if necessary.
Role of an accountant:
- To sort the data obtained through bookkeeping to identify required data
- for financial statements.
- Supervise the work of the bookkeeper and instruct them if necessary.
- To prepare financial statements for stakeholders.
- To keep oneself updated with the latest regulatory guidelines.
- To provide necessary financial data to management for instant financial
- decisions.
The functional difference between bookkeeping and accounting
We have identified the differences between a bookkeeper and accountant and organized them in a table according to the point of difference. It is not an easy
task to do, but people should know this to identify them or while choosing their career. Have a look at the following table.
| Point of difference | Bookkeeping | Accounting |
| Relation with Business | It involves systematic input of daily financial activities. | It involves processing the data obtained from bookkeeping. |
| Name of the role player | One who does bookkeeping is called a bookkeeper. | One who learns and practices accounting is called an accountant. |
| Involvement in Management decision making | Data provided by a bookkeeper does not count while taking financial decisions by management. | Accountants’ data is considered as the source of management decisions. |
| Data Analysis | It does not require data analysis. | The accountant’s job description mainly covers data analysis. |
| Preparing Financial Statements | It only provides data required for financial statements. | Accounting interprets data to convert it into components of financial statements. |
| Prerequisite | There is no prerequisite to being a bookkeeper. | Accounting requires a graduate degree in accounting or finances to become an accountant. |
| Cost Analysis | Bookkeeping provides entries to the cost account. | Accounting performs cost analysis to help businesses with cost management. |
| Documentations | Bookkeepers require to keep traces and evidence of documents of each entry to provide to accountants if and when necessary. | Accountants ask for documents from bookkeepers if required for submission to any authority. |
| Reconciliation | Bookkeeping requires reconciliation for every the book they maintain. | Accounting does not always require reconciliation rather adjusts the book as per business requirements. |
| Nature of Job | Bookkeeping jobs are clerical. | Accounting jobs are analytical. Accounting jobs are analytical. |
| Financial Objective | Bookkeeping does not have any financial objectives. | Accounting has the objective to analyze and interpret financial data, thus having financial objectives. |
Prerequisites to become a bookkeeper/ accountant.
There are certain prerequisites for each job as per their job description and job requirement. When it comes to accounting, some special skill sets are
required to become an accountant.
Prerequisites to become a bookkeeper:
- To become a bookkeeper, you need the following qualifications.
- Secondary school qualification/high school degree
- GED (General Educational Development) test
- Diploma or Certificate course on Bookkeeping
Prerequisites to become an accountant:
- To master the art of accounting and get a job as an accountant, you require one of the following qualifications. The more you are qualified, the more you get to earn.
- Bachelor of Accounting
- Master of Professional Accounting
- CPA (Certified Practicing Accountant)
- CA (Chartered Accountant)
Can one replace another?
The major concern regarding this issue is can an accountant be replaced with a bookkeeper or vice versa. The answer is a bit tricky. Both require knowledge
about one another. A bookkeeper must know at least the effect of his/her input on a financial statement. At the same time, an accountant must know how the
entries are done in bookkeeping.
If we consider knowledge as the main point to draw a line between them, it is obvious that an accountant can easily replace a bookkeeper but a bookkeeper
cannot do the same. He requires additional skillets to surpass them, and in the process, he will become an accountant.
While comparing them in terms of pay grade, the paycheck of bookkeeping weighs much lower than that of accounting due to a lack of analytical ability. So
it will be difficult to ask an accountant to do the job of a bookkeeper.
As per our analysis, both bookkeeping and accounting are immensely important in terms of business. Accurate bookkeeping leads to accurate accounting. So the role of a bookkeeper cannot be ignored so easily. Despite having significant differences between them, they are part and parcel
of any entity. If bookkeeping starts the journey to financial statements, accounting carries it forward for all the stakeholders.
