Difference Between Bookkeepers and Accountants

A bookkeeper is a person without a college degree in accountancy responsible for the data entry tasks. Some of the tasks included are:

  • Entering bills from VendorsPayment of billsPreparation of Sales invoiceMailing of statements to customersProcessing payrollPayrollPayroll refers to the overall compensation payable by any organization to its employees on a certain date for a specific period of services they have provided in the entity. This total net pay comprises salary, wages, bonus, commission, deduction, perquisites, and other benefits.read more data

An accountant will hold a professional degree in accounting and continue the operations performed by the bookkeeper. Some examples are:

  • Adjusting entries for recording expenses not yet entered by the bookkeeper (e.g., Interest on bank loans since the last bank payment, wages earned by employees to be processed the following week)Preparing company financial statements such as Income statementIncome StatementThe income statement is one of the company’s financial reports that summarizes all of the company’s revenues and expenses over time in order to determine the company’s profit or loss and measure its business activity over time based on user requirements.read more, Balance Sheet, and Cash flow statement.They further assist the management in understanding the financial impact of its past and future decisions.

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Sub-Categories

Bookkeeping Sub Category:

  • Single-entry bookkeepingDouble-entry bookkeepingVirtual bookkeeping

Accountants Sub Category:

  • Financial accountingFinancial AccountingFinancial accounting refers to bookkeeping, i.e., identifying, classifying, summarizing and recording all the financial transactions in the Income Statement, Balance Sheet and Cash Flow Statement. It even includes the analysis of these financial statements.read moreManagement accountingCost accountingCost AccountingCost accounting is a defined stream of managerial accounting used for ascertaining the overall cost of production. It measures, records and analyzes both fixed and variable costs for this purpose.read moreHR accountingResponsibility accountingResponsibility AccountingResponsibility accounting is a system of accounting where specific persons are made responsible for the accounting of particular areas and cost control. In this type of accounting system, responsibility is assigned based on a person’s knowledge and skills.read more

Bookkeeper vs Accountant Infographics

Let’s see the top 7 differences between Bookkeeper vs Accountant.

Key Differences

  • Bookkeepers must identify, quantify, record, and eventually classify financial transactions. In contrast, accountants must summarise, interpret, and communicate the latest financial transactions classified in the ledger account.Financial decisions cannot be made exclusively based on bookkeeping records but can be considered based on accountant records.Bookkeepers are not required to create financial statements, but accountants are responsible for preparing for the same.The senior management generally does not get involved in the functioning of the bookkeepers. However, they would take an interest in the work of the AccountantsWork Of The AccountantsAn accountant is a finance professional responsible for recording business transactions on behalf of a firm, reporting the firm’s performance and issuing financial statements. Thus, an accountant plays an important role whether it is a small domestic entity or a large multinational company.read more as they require the information for making future management decisions.The tools used by bookkeepers are Journals and Ledgers, and that of accountants are the balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders’ equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner’s capital equals the total assets of the company.read more, income statement, cash flow statement, etc.Bookkeepers do not require any special skills since most activities are mechanical. Still, accountants need specialized analytical skills due to the complexity involved in maintaining the books of accountsBooks Of AccountsThe best accounting books are - Accounting made simple: accounting explained in 100 pages or less, A brief history of economic genius paperback, Accounting all-in-one for dummies, Accounting handbook (Barron’s accounting handbook), The tax and legal playbook: game-changing solutions to your small.read more. It will require a professional degree in accounting and also some past work experience in the same.

Bookkeeper vs Accountant Comparative Table

Activities

Though, on many occasions, the terms bookkeeping and accounting are used interchangeably, their activities have their own set of differences, which we shall analyze. The activities of bookkeeping consist of:

  • Single Entry accounting system; Double EntryDouble EntryThe double-entry accounting system refers to the double effect of every journal entry. It is based on the dual aspect i.e. Debit and Credit and this principle states that for every debit, there must be an equal and opposite credit.read more Virtual

  • Management

  • Financial

  • Cost

  • HR

  • Responsibility

  • Preparation and sending of invoices to vendors and customersRecording of payments from the consumersRecord, Processing, and payment of invoices from suppliersRecording and monitoring of inventory changesProcessing payroll and petty-cash transactionsCategorizing of credit card and other related expensesMonitoring of late payment and accordingly sending reminders to the impacted parties

The accountants require a higher level and specialized tasks that generally require the services of a CPA (Certified Public Accountant) or multiple Non-certified accountants with oversight of a CPA. Some of the functions undertaken involve:

  • Creation and management of the Chart of Accounts (COA)The Chart Of Accounts (COA)A chart of accounts (COA) lists all the general ledger accounts that an organization uses to organize its financial transactions systematically. Every account in the chart holds a number to facilitate its identification in the ledger while reading the financial statements.
  • read moreDesigning and maintaining financial statementsFinancial StatementsFinancial statements are written reports prepared by a company’s management to present the company’s financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read moreRecord of accrued revenue and deferred revenuesDeferred RevenuesDeferred Revenue, also known as Unearned Income, is the advance payment that a Company receives for goods or services that are to be provided in the future. The examples include subscription services & advance premium received by the Insurance Companies for prepaid Insurance policies etc. read more and expensesCreating a budget and making comparisons against Actual expenses incurredDetermining estimated taxesEstimated TaxesEstimated Tax is the approximately calculated tax to be paid by an earning individual eligible to pay taxes over their income. This amount is projected annually based on the net income earned by the individual after all deductions as per the income tax act prevalent in a particular State for that fiscal year.read more and preparing tax documents accordinglyKeeping on issues relating to Financial and Tax compliance and take action accordinglyIdentification of potential tax write-offWrite-offWrite off is the reduction in the value of the assets that were present in the books of accounts of the company on a particular period of time and are recorded as the accounting expense against the payment not received or the losses on the assets.read more or other profit-maximizing opportunities.

The hiring of an individual to conduct these activities could have conflicting views. Often, small businesses may have the bookkeeping tasks completed in an unprofessional manner, forcing the CPA to spend more time catching up with these activities before progressing ahead. It is also preferred to have in-house bookkeepers who are professionally trained, giving the comfort level to the accountants.

For reducing costs and maximizing effectiveness, the firm must make sure they are using the same standardized methods and best practices. They should also be encouraged to communicate regularly and clearly. Finally, they should be made to work as a team instead of creating any barriers.

Conclusion

Ensuring the financial records are correctly organized, and finances are balanced by the bookkeeper coupled with smart financial strategy and timely tax filing of the accountant directly contributes to the long-term success of every business.

Certain business owners manage their finances on their own. In contrast, others may opt to hire a professional to focus on sections of the business they are interested in. Either of the options will help their business to grow. Additionally, with the advent of technology, multiple softwares are getting updated for executing the tasks automatically. This aspect will change the definition and requirements with passing time, and hence one must be updated with the same.

This has been a guide to bookkeeper vs accountant. Here we discuss the top differences between bookkeepers and accountants with infographics and a comparison table. You may also have a look at the following articles for gaining further knowledge in Basic Accounting –

  • Excel BookkeepingControl AccountExamples of BookkeepingConsignment Accounting Example