What is the difference between a bookkeeper and an accountant?
What Is the Difference Between a Bookkeeper and an Accountant?
What is the difference between a bookkeeper and an accountant? It’s fair to say that if you asked most people what the differences were with these two roles, they might find it difficult to separate them. To the layman, they may almost appear to be one and the same. However, if you delve a little deeper you find that this isn’t the case.
Of course, there are some similarities with both of these jobs, but in reality, they both support a business at very different stages of the financial process. Bookkeeping is commonly associated with being more administrative and transactional. Accounting, on the other hand, is a much more subjective role. It can offer insights into your business, based on the results of bookkeeping information.
Here, Contractor Unlimited will take you through the main differences between the two roles and highlight any similarities between them too.
Bookkeeping Explained
Bookkeeping is the touchstone to making sure your business is a financial success in the here and now. It is a method of recording daily financial transactions in a consistent and thorough manner.
The process of bookkeeping involves:
- Record keeping of all financial transactions
- Noting and posting debits and credits
- Producing and dealing with invoices
- Balancing and maintaining general ledgers, historical accounts and subsidiaries
- Managing and completing the payroll
One of the main aspects of bookkeeping is maintaining a general ledger. This is a document in which a professional bookkeeper will record the amounts from expenses, such as receipts and also from sales.
This is a process called ‘posting’ and the more sales that are made and completed, the more regularly the ledger is posted. This type of document can be created in one of three ways:
- with specialist computer software
- with a computer spreadsheet
- with a lined sheet of paper/pad/book
How complex the bookkeeping system needs to be really depends on how big the business is and how many transactions are undertaken on a daily, weekly and monthly basis.
Every single sale and purchase made by a company must be recorded in the ledger and there are also some other items that will require special supporting documents.
The Government and HMRC will lay out which business transactions require supporting documents on their website, so it is always worth checking these sites for more reference material and information.
Accounting Explained
Accounting uses the financial records and information that has been put together by the bookkeeper or the owner of the business in question and from this information, produces financial models.
This means that it can be a much more subjective process and has more of a transactional nature.
The process of accounting involves:
- Preparing and recording adjusted entries (this is the process of recording expenses that have occurred, but that haven’t yet been recorded in the bookkeeping process)
- Setting up and preparing company financial statements at various stages of the year, or simply annually
- Analysing and revising the cost of business operations
- Helping businesses with, or completing income tax returns from scratch
- Helping business owners to understand the impact of the financial decisions they make
Accounting will provide a business with reports that can bring key financial indicators together. The net result of this process if a more thorough understanding of real profitability, and an awareness of cash flow within a business.
The process of accounting will turn the information bookkeepers create from ledgers and statements into a bigger picture of the business and how a company is likely to progress.
Business owners will look to their accountants for assistance with tax planning and filing, plus financial forecasting.
Is there ever crossover between Bookkeeping and Accounting?
What is interesting to note is that there can be some occasional crossover with the two roles. Over the last few years, with the increasing advent of software for both professions, there are components of the accounting process that have been absorbed into the bookkeeping process somewhat.
As an example, some bookkeeping software is now capable of building financial statements, and this can mean that some of the more traditional lines of both roles become a bit more blurred.
Bookkeepers Work Versus the Accountants Work
Whilst it is important to understand the differences in the roles of accountants and bookkeepers, it is also important to understand the different credentials both have, so that business owners know when and how to utilise each one.
What do the roles of a bookkeeper and an accountant entail, specifically?
-
Bookkeeper
Bookkeepers will be required to have between two to four years of experience in their job, alongside a suitable professional qualification in their subject.
A good bookkeeper will be a stickler for accuracy and have a knowledge and desire to learn as much about financial topics as possible.
A bookkeeper will have their work overseen by an accountant or by the business owner they are working for.
2. Accountant
To hold the title ‘accountant’ in our opinion, someone should have a bachelor’s degree in accounting. For those that don’t have that specific qualification, it may be possible to consider a suitable finance degree as an adequate substitute. The biggest benefit though, has always been and will always be experience.
HMRC and the Treasury love messing with the rules, so accountants should also gain extra professional certifications and keep their training up to date often and throughout their career.
Contractor Unlimited Can Help You With Accounting and Bookkeeping Services
The long term success of every business depends on the skills of both a certified accountant and a professional bookkeeper.
There are some business owners who prefer to take charge of their own finances, whilst others prefer to hire professionals who can take a lot of the pressure and stress away.
One thing is clear, making sure you invest time and money into the financial side of your business will help it grow successfully in the long term.
If you’re looking for Warrington accountants, here at Contractor Unlimited we offer a wide range of financial services to business owners across the north west with our Warrington based team. If you’d like to find out more about how we can help with accounting or bookkeeping services, why not give us a call on 01925 393 186
