The Difference Between Accountants and Bookkeepers

People are usually hard-pressed when they are trying to describe the differences between accountants and bookkeepers. This is why we have compiled the top-most differences between the two as well as their different functions. Contrary to what people think, they actually have two separate roles. Let us find out what they are!

Accountants and bookkeepers generally share common goals and they are to analyze and manage every stage in a financial cycle. To know what each stage is comprised of, keep on reading.

The Functions of a Bookkeeper

Bookkeepers are responsible for recording the daily financial transactions of a business, person or entity and it has to be done in a consistent manner. They are a key component in building a business’ strong financial foundation.

Bookkeeping is mainly comprised of:

*Recording financial transactions

*Posting credits and debits

*Producing invoices

*Balancing and maintaining subsidiaries, historical accounts and general ledgers

*Completing payroll

One of the main roles of a bookkeeper is to maintain a general ledger. To those who don’t know what that is, it is basically a document where you can find a record of all the amounts of expenses and sales made and incurred during a particular period of time – it can be daily, weekly, monthly or annually. Bookkeepers call this process as posting. So long as there is a transaction, it will be posted in the ledger.

A general ledger can be created using a computer spreadsheet, a simple lined sheet of paper, or a specialized software. If the business has a linear system of income, the posting wont be as hard. On the other hand, if the business is huge and a lot of transactions come in every minute to an hour, it would need a more complex system of bookkeeping. Like we just said, all the transactions including the purchases and sales MUST be recorded in the general ledger. Certain documents also have to come with it like the receipts which could act as a supporting document for every posting in the ledger.

Shifting Landscapes
In the past, one of the traditional lines that define accounting and bookkeeping processes from each other was the making of financial statements. But because the popularity of software for accounting and bookkeeping is steadily rising, it has now been blurred. Bookkeepers are now capable of making and building financial statements with the help of the software.

The Functions of an Accountant
Accountants have to deal with high-level processes in order to rationalize the information previously complied for them. Using the materials and financial statements made by bookkeepers, they would produce a financial model to show the current financial status of a person, business or entity. The work of an accountant is more inclined to making subjective decisions unlike the bookkeeper which is mainly focused on the transactions.

The accounting process includes:

* Preparing adjusting entries.
This is the process of recording expenses incurred by the company but has not been recorded by the bookkeeper in the bookkeeping process.

* Preparing the company’s financial statements

*Analyzing the costs of operations

*Completing the company’s income tax returns

*Aiding the owner of the business in understanding the effect of their every financial decision

Accountants are essential for businesses because they are the ones that provide the reports that will be used as a basis on a company’s future financial decisions. Because of an accountant, there would be an understanding on the business’ actual profitability. The owner would be able to better understand the cash flow of his or her business.

Accounting turns information found on the general ledger prepared by the bookkeeper into statements that are capable of revealing the bigger picture for the business and which path the business should be heading. Wise business owners run to accountants for help when they need strategies for tax planing, tax filing and financial forecasting.

Bookkeeper Vs. Accountant: ROLES

As a business owner, you need to understand the difference between bookkeepers and accountants. Not only is it empowering for you and the business but it will also help you determine who and when to call when the need arises. Read on to understand the different kinds of credentials bookkeepers and accountant need to have as well as the roles they entail.

Bookkeepers
Bookkeepers are typically required to have two to four years experience and/or an associate’s degree. For bookkeepers to become successful in their field, they have to be sticklers when it comes with accuracy. They also need to be knowledgeable on key financial topics. A bookkeeper’s work is usually overseen by an accountant or the business owner he or she is working for.

Accountant
In order to gain the title “Accountant”, you must possess a bachelor’s degree in Accounting. Finance degrees also serve as adequate substitute but only on rare instances. Unlike bookkeepers, accountants are eligible to obtain additional professional certifications. Case in point, if an accountant has sufficient education and experience, he or she can obtain the title of CPA or Certified Public Accountant. This is one of the most common designations for accountants. In order to become a CPA, you must pass or excel in the Uniform Certified Public Accountant Examination. It does not end there though. You also need to possess ample experience working as a professional accountant.

The Bottom Line

There has to be a successful marriage between the accountant and the bookkeeper. Both are essential in a business’ long term financial success. The key factors of a business’ success are properly balanced finances and organized financial records. They are both reliant on the accountant and the bookkeeper.

Although a business owner can manage his own finances by himself, successful companies always advice that one should hire a professional in doing so. This will give you more time to focus in other aspects in the business and do the things which you are better at.

Remember that whichever you choose to invest may it be your time or money, it can help your business grow one way or another. Also, one can never be successful especially in business if he or she does not ask for assistance from another party. Do not hesitate to consult people to recommend you a proper bookkeeper or accountant. You never know, they can be your secret to success!