Difference Between Bookkeeping and Accounting

Bookkeeping vs. Accounting. Precisely What is Bookkeeping? And what's the difference between Bookkeeping and Accounting?

Did you always think it was the same thing? Most people do.

While all businesses need both services, there is a distinction between the two. For entrepreneurs with little bookkeeping or accounting experience, it's not easy to distinguish between the two.

Some people think accounting and bookkeeping mean the same thing, but it's a process, and one leads to the other. Bookkeeping is the beginning of accounting. Look at it in terms of an auto assembly line. First, the car chassis is assembled (bookkeeping), then the rest of the car follows (accounting).

Bookkeeping vs. Accounting

Understanding Bookkeeping

Bookkeeping is a record of financial transactions and is part of the process of accounting in business. Transactions include purchases and payments, sales, and receipts, by a person or a partnership. There are several bookkeeping methods, but the most used are the single-entry and the double-entry bookkeeping systems.

Bookkeeping is the work of a bookkeeper, who records the day-to-day financial transactions of a business. They record the transactions mentioned above, whether cash or credit, into the correct daybook: customer ledger, petty cash ledger, the suppliers' ledger, or the general ledger.

Understanding Accounting

Accounting is the measurement, processing, and communication of financial information about businesses and corporations. Accounting, which has been called the "language of business," produces a "snapshot" of economic activities and delivers this information to management, creditors, investors, and regulators. Accounting can be divided into several fields. Financial accounting focuses on reporting financial information, including the preparation of financial statements. Management accounting focuses on the analysis and measurement of information for internal use by management.

Even though accounting has existed in various forms and levels of sophistication throughout many human societies, the double-entry accounting system in use today was developed in medieval Europe, particularly in Venice, and is usually attributed to the Italian mathematician Franciscan friar Luca Pacioli. Today, accounting delivers financial statements audited by accounting firms and is prepared following "generally accepted accounting principles (GAAP)."

Here's the Similarities Between Bookkeeping and Accounting:

Bookkeeping and Accounting go hand in hand. Bookkeeping is the first rung on the ladder to accounting. If the bookkeeping is done right, then the accounting should be sound. If it's sloppy and erroneous, then those mistakes will haunt the bookkeeping forever.

Bookkeeping vs. Accounting. Key Differences.

Accounting - Involves reporting, interpreting, analyzing, and summarizing financial data. Crucial to determining a business's financial health.

Bookkeeping - Involves recording financial data in chronological order and delivering summarizing reports.

Skills - Bookkeepers aren't required to have any special education but should be conversant with critical financial topics. Many even specialize in different business sectors.
An accountant needs to have a bachelor's degree in accounting or finance degree. Accountants usually seek additional professional certification like Certified Public Accountant (CPA).

Purpose - Bookkeeping is the process of recording financial data in chronological order and is critical to accounting - financial data, accurate financial data, is crucial to the financial statement's authenticity.
Accounting is reporting, classifying, analyzing, and summarizing financial data. Without this process, there is no simple method to forecast the success or failure of a business.

Decision Making - Fairly straightforward, the bookkeeper oversees the ledger entries, recording everything in their financial universe.
The Accountant uses that information to produce an orderly, more understandable document, taking all the bookkeeper's information and rolling it into a straightforward presentation.

Tools - Bookkeepers use computers and accounting software such as QuickBooks, FreshBooks, and Wave to help them with their tasks. But essential tools are experience and education
Accountants use the following equipment and materials: computers, financial reports, accounts, stationery, e-mail, and the Internet. But also experience and education.

Preparation of Financial Statements - Bookkeepers can prepare financial statements for smaller enterprises, including profit and loss statements, balance sheets, and cash flow statements.

For accountants, financial statements are written records that state the business activities and its economic health. Other accounting firms and government agencies often audit financial statements for accuracy, tax liability, financing, or investing.

Types -

Bookkeepers:

• Cash. It doesn't get more basic than this. Business transactions pass through the Cash account, which is so crucial that bookkeepers often use two journals, cash receipts and cash disbursements.
• Accounts Receivable. If your company is not paid upon delivery of a product or a service, that's accounts receivable.
• Inventory. Those unsold items in your warehouse are inventory and need to be accounted for.
• Accounts Payable. This is what you owe and has to be stated.
• Loans Payable. This is also debt and needs to be counted against profits.
• Sales. This is income so that it can offset the other debts.
• Purchases. More money going out, so it needs to be recorded as well.
• Payroll Expenses. For an accurate picture of financial health, all of this expense needs to be listed.
• Owner's Equity. This is the investment made into the enterprise.
• Retained Earnings. These are profits and can be used to grow the business or disbursed as dividends.

Accountants - There are four basic types of accounting: public, corporate, government, and forensic. All require some common skills but also differ significantly in function.

Bookkeeping vs Accounting.
Keep it In-House, or Out-of-House?

But wait. We know that Bookkeeping and Accounting have different roles to play in your enterprise. We also know that both functions only work when done by experienced, skilled, and diligent staff. And we also understand that both procedures can be expensive to do in-house. But if we told you there was another way than having a bookkeeper and accountant on your team. It's called outsourcing, and it's been saving businesses in all sectors lots of money for decades.

Down to the details. Outsourcing your bookkeeping and accounting services can mean significant benefits in almost any way you can measure it. Here's how.

Improve Productivity - Since accounting and bookkeeping are now off your list of things to do, you and your staff can devote more of your precious time to building your business! Customer engagement, marketing, staff training, all the other things where your time can be better utilized.

Save Time - As mentioned earlier, time may be one of your most important assets. How many of us have only wished "we had more time" to complete a project? Well, Outsourcing can give you that time.

Cost-Effective- This is a significant point. If you can get the job done faster, more accurately, and for 60% less money, well, wouldn't you?

Data Security - If you're worried about keeping your data secure, well, don't. Business Process Outsourcing is probably one of the most secure data transmission systems available. Their business depends on keeping their customer's data safe.

Quality Service - BPOs continuously train and upgrade their teams' ability to be quick and accurate. Not only are they professionals, but they can do the work faster and more accurately than one of your staff that only does data entry "part-time."

Latest Tech - Since Outsourcing is a very competitive game, the best outsourcing firms always upgrade their hardware and software. Specialty software designers are quick to supply them with precisely what they need.

Improved Accuracy - If your job, your only job, is bookkeeping or accounting, it stands to reason that you would be pretty good at it. Factor in a culture that strives for perfection, no, demands perfection. BPOs want and need those individuals, so that's the kind of people handling your account.

24/7 Support - A professional BPO will offer you 'round the clock instant response to your questions or needs. Service and accuracy are often what will differentiate between outsourcing firms.

Improve Focus On Core Duties - The result of all of the above is an opportunity for you and your team to be more involved in the core functions that got you into your business in the first place! You can look at it as a kind of invigorating rededication to the purpose.

You Deserve The Best. Call Rely Services.

It takes a team of qualified, skilled, and experienced professionals to make your bookkeeping and accounting successful. This is precisely what Rely Services can offer you. And at a fee that will significantly lower your overhead and allow your key players to concentrate on making money.

Using Rely Services as your finance and accounting bpo partner will save you more than time and money. Since they are continually refining their business methods, their constant pursuit of perfection will benefit your operational practices. Contact Rely Services today for a detailed evaluation of the many ways they can make you more successful.