For people from the non-commercial background, it is very difficult to define the difference between an Accountant and Bookkeeper. Generally, both the line of work is admixed together.
Here, bookkeepers stand as troopers of the army at the very initial level. All the accounting activities are commenced by them.
While the Accountant’s work is analytical and advisory in some manner and it also based on bookkeeping activities.
On the other hand, role of bookkeepers and accountants are equally significant when it comes to precisely proclaiming financial activities and overall performance of the business. As a result, demand for such professionals is increasing in business organizations throughout the world.
For better understanding of both the activities let us have glance on the simple definition of bookkeeping and accounting–
It is a daily activity of recording financial data relevant to business operations in a regular manner. Bookkeeping is the activity of classifying, recording and analyzing business transactions in the pre-determined professional format.
It is a process of identifying, measuring, and communicating financial information to entitle certain judgments and decisions by the users of the information. Accounting is considered as the activity of informing to other about the economic position of the firm.
Now it may be clear that what exactly both the activities are about. Let us further discuss some of the main functions performed by Bookkeepers and Accountants-
The following functions are key components to assemble a strong organization. These are the major activities performed by Bookkeepers :
- Recording financial transactions daily
- Precisely posting credits and debits daily
- Processing invoice, receipts, payments, general ledgers, etc
- Payroll related work,
- Adjusting multiple accounts and creating adjustment report
- Managing accounts payable and accounts receivable operations
- Calculating GST.
- Lodging and preparing Business activity statement(BAS)
As we shared before, accountant’s work is more analytical, calculative and advisory in nature and it overlaps many of the above mentioned expert activities in some manner.
As their work defines their activities they can not only help in general accounting activities but they tends to analyze past performance and draw financial projections for your business and guide you through future financial activities to be performed for healthy business operations.
Services performed by accountants includes :
- Tax assessment, planning, and advice
- Preparing financial statements
- Interacts with internal and external auditors for auditing purpose
- Analyze and review budgets and expenditures,
- Business concerned assistance
- Corporate financial reporting and compliance
- Provide guidance on superannuation funds
- Resolve accounting disparities
- Analyze and compile financial information to prepare general ledger
- Supervise financial management
- Develop, recommend and manage financial database through manual documents and computer software systems.
- Completing Payroll related works
This was just a short glance of works performed by Bookkeepers and Accountants, but in reality it is a huge arena with lots of complex and complicated task to be performed.
Now let’s see the heart of this article. Yeah, its 5 major difference between the Bookkeeper and Accountant:
On the basis of purpose
- Preparing financial statements
- Accountants measure, prepare, analyze, and interpret the financial statement in order to collect and represent financial statement.
- While Bookkeepers records all receipts, revenues, expenditures, etc to create accounting ledger.
On the basis of management role
- Top management takes special interest in accountants work because they are highly concerned with the information and projections which an accountant draws.
- Top management is less concerned with how the bookkeeper functions.
On the basis of Tools
- Balance sheet, profit and loss account, cash flow statement, and position declaration.
- General ledger, supplier ledger, customer ledger and cash book.
On the basis of decision empowerment
- Business decisions can be taken on the basis of Accountant’s archives.
- Financial decision cannot be made merely on the basis of bookkeeper’s records.
On the basis of skills
- Due to the complexity of work accountants require special analytical skills.
- Bookkeepers do not require any special skills as most of the work is in pre-determined formats.
Hence, the conversation about differentiating Bookkeepers with Accountants could not be ended because it’s a huge battlefield. The most of the companies are confused which designation to be choose between them. But while choosing any of them the company should review the difference between their functions and activities. Whichever designation fits the requirements of the company should be selected. Most of the time companies opt for Bookkeepers and get outsourced the accounting work from other CPA institutes for financial decisions. This is the more cost effective and convenient way of getting accounting information updated.