Some of the Key Differences between Accountants and Bookkeepers
Any business owner would agree that bookkeeping and accounting are two essential functions. In a nutshell, bookkeeping means recording financial transactions, whereas accounting entails the reporting, summarizing, classifying, interpreting and analyzing the financial data. With that, it’s right to say that accountants and bookkeepers have their roles differently as much as they may appear to be in the same profession.
The Key Functions: Accountant vs Bookkeeper
Bookkeeping is more of an administrative and transactional role of handling the day-to-day task of recording financial transactions. Accounting provides the business owners with financial insights based on information from bookkeeping data extracts. The separate concepts of bookkeeping and accounting started from way back, and both fields continue to evolve in their own way.
Let’s look into some of the differences between accountants and bookkeepers.
Role of the Job
Regarding bookkeepers, they mainly need to identify, quantify, record and eventually classify financial transactions. On the other hand, accountants need to summarize, interpret, and communicate the newest financial transactions categorized in the ledger account. An accountant examines the financial data from bookkeeper’s records and provides the business owner with important financial insights and financial advice.
Regarding decision-making, the bookkeeper’s financial decisions may not be made solely on the bookkeeping records. Accountant’s decision making is based on the accountant’s records.
Regarding the management role, bookkeeper’s top management often does not have a role in how the bookkeeper operates. For accountants, the executive has a great interest in their functions as they may need the information to make crucial future decisions.
Financial Statement Preparation
Bookkeepers’ tasks do not require the creation of a financial statement. Now for the accountants, their function involves preparing financial statements as part of the accounting process.
Main Tools Used
Bookkeepers mainly use ledgers and journals as their primary tools of accounting. On the other hand, the accountants use balance sheets, profit and loss statements, cash flow statement etc. as their primary tools of accounting.
The bookkeepers classify their accounting into three sub-categories: single-entry bookkeeping, double-entry bookkeeping, and virtual bookkeeping. Accountants categorize their functionality into five sub-categories that is financial accounting, management accounting, cost accounting, HR accounting and responsibility accounting.
Special Skills Needed
For bookkeepers, they do not need any special skills because most of the tasks are mechanical. A bookkeeper with professional certification is enough to perform bookkeeping. Accountants’ functions need to have some form of special analytical skills due to the complex nature of the work they involve in. To become an accountant, you must earn a bachelor’s degree from an accredited college or university. Another certification, such as CPA, gives an accountant the right advanced skills to perform their duties.
The fact that Accountants and Bookkeepers are within the same profession does not mean they have the same functions. Over time now, the bookkeeping and accounting landscape is shifting. Several misconceptions exist within the industry, but there are striking differences between the two. 3E Accounting India is an accounting consulting firm offering both bookkeeping and accounting services. If you need any services from us our numbers are always open. Contact us for more information.