Lots of people get confused about the difference between bookkeeping and accounting. Can they be used interchangeably? Sure, if you want. But it's good to know the difference.
Bookkeeping is like the groundwork, while accounting builds on top of that to do more fancy analysis. They both work toward the same goal. But they operate at different stages of the financial cycle and offer distinct benefits to your business.
Simply put, bookkeeping is more transactional, building the foundation. Accounting builds off the foundation to do more analysis and interpretation.
First, There's Bookkeeping
Bookkeeping is all about keeping track of day-to-day money stuff. Here's what bookkeepers do:
Recording Transactions: They jot down every money move, like sales, purchases, and expenses.
Dealing with Debits and Credits: Making sure all the money coming in and going out is logged in the right place.
Invoicing and Paying Bills: They make and send out invoices to make sure everyone pays up on time. They also pay the bills that are due.
Making Financial Statements: Putting together important documents like balance sheets and income statements.
Keeping the Ledger: Tracking and reconciling all the transactions in one big book to see the overall financial picture.
Sorting Out Payroll: Handling everything to do with paying employees – from wages to taxes.
Then, There’s Accounting
Accounting is more about looking at the big picture and figuring out what it all means. Here's what accountants do:
Adjusting Entries: Tweaking the financial records to make sure everything's accurate and matches reality.
Analyzing Financial Statements: Going over those reports with a fine-tooth comb to find trends and areas to improve.
Checking Out Costs: Digging into where the money's going and how to spend it smarter.
Doing Taxes: Preparing and filing tax returns to make sure the business follows all the rules and gets the most deductions.
Giving Advice: Offering tips and tricks to business owners based on all that financial info.
Different Roles: Bookkeeper vs. Accountant
Bookkeepers and accountants might do some similar stuff, but they're different in some important ways:
Bookkeeper: They're all about accuracy and organization, usually without needing a fancy degree. They keep things in order under the watchful eye of accountants or business owners.
Accountant: They've got degrees and maybe even certifications like CPA. They're the ones who dive deep into the numbers and offer expert advice.
In Short
Bookkeeping lays the groundwork, while accounting gives you the big picture.
Having solid financial management is key to running a successful business. Some people can handle it themselves, but most do better hiring a pro so they can focus on what they're good at.
Do We Do Bookkeeping or Accounting?
Yep, we do both – mostly. We handle all the tasks of a bookkeeper and an accountant, except for doing tax returns. We stick to keeping things neat and helping business owners understand what all those numbers mean. We team up with accounting firms to handle the tax stuff.
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