Bookkeeping and accounting are two distinct professions with diverse responsibilities and career development. Bookkeeping forms part of the base for accounting which is regarded as the language of the business. So, what is the difference between bookkeeping and accounting? Read on…
Building a financially viable business needs a bookkeeping process to consistently record daily transactions. Maintaining a general ledger is one of the key factors – this basic document holds a record of sale and expense receipt amounts. Every time a transaction is completed it will be posted in the ledger, along with any required supporting documents.
The size of the business determines the complexity of the bookkeeping system and whether it needs to be updated daily, weekly, or monthly. However, the components within the system always comprise of:
- Recording of all financial transactions
- Posting credits and debits
- Issuing invoices
- Maintaining and balancing the general ledgers
- Continuing to balance subsidiaries and historical accounts
- Completing payroll – processing salary payments, taxes, and benefits
Bookkeepers will be able to explain financial information and the implication of reports to business owners.
As a general rule bookkeepers don’t need to have any formal qualifications. Profound knowledge of key financial subjects and accuracy are two key skills required to be successful in the role. It’s normal for a bookkeepers work to be overseen by an accountant whose books are being kept for them.
As a small business owner, you can use a professional outsourced bookkeeping company so that you can concentrate on growing the business. You’ll be assured of total privacy, an entire range of business services, and be able to get tax and audit-ready financials as you need them.
Accounting uses the financial information compiled by the bookkeeper to produce a financial model – bringing the key financial pointers together. This results in a greater depth of knowledge regarding the cash flow and actual profitability of the business.
- Preparing financial statements for companies
- Completing income tax returns
- Costs of operations analysis
- Recording adjusting entries – changes that are made to journal entries to amend the old entry and keep figures correct prior to a trial balance
- Helping business owners understand financial operations and decisions
Accountants will be able to advise on strategic tax planning, tax filing, and financial forecasting.
To classify for the title of an accountant a bachelor’s degree in accounting is needed. Additional studies can lead to the title of Certified Public Accountant (CPA) which is one of the most common types of accounting terms. To become a CPA, your professional accountant must have the necessary experience and pass the Uniform Certified Public Accountant examination.
You may wish to employ a personal tax advisor – a financial professional who offers advice on strategies to minimise the tax owed – within the law and regulation boundaries. Initial training as an accountant is followed by a qualification gained from the Chartered Institute of Taxation or other governing bodies.
Your tax advisor may work individually or be part of a specialist team. And focus on tax law and counselling related to business financials – providing you with advice on tax returns, credit and interest statements, and clarity on calculating taxes during retirement.
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