Bookkeeping and Accounting

Is Bookkeeping and Accounting Equivalent? Probably NO!!

Might sound awkward but most of the business owners use the term of bookkeeping and accounting interchangeably. The same is true that they play an important part in the company’s finance management, however, they have some key differences. This means that the business owners also need to get aware of the difference in their roles and their working process to be ahead of the crowd.

Yes, both the terms i.e. bookkeeping and accounting are related to money and financial health of your business. But let us grab the chance to understand the differences between them.

When you are running a business, your main goal is to grow and succeed. However, it is often dependent on your financial records management. Managing your financial books are more than just recording your transactions and balancing your sheets. Your financial reports should be accessible so that you develop a sound workable business strategy.

Have a glimpse at the functions of both bookkeeping and accounting:

Bookkeeping Functions                                                            

Bookkeeping comprises tasks required during the initial phase of the accounting process. It includes consistent, timely, and correct recording of the business’ financial transactions in chronological order. The comprehensive set of bookkeeper’s duties include but not limited to:

  • Maintain a complete and organized set of books, comprising of general ledger and all other sub-ledgers. The sub-ledgers may include fixed assets, accounts payable, inventories, tax, costs, accounts receivable, cash, and sales.
  • Create and issue the concerned customer invoices.
  • Record suppliers’ invoices.
  • Suppliers Payment.
  • Log cash receipts from customers.
  • Document and inventory changes.
  • Process employee payroll.
  • Manage petty cash transactions.
  • Preserve all supporting documents for all business transactions.

Bookkeeping involves following a fixed set of procedures to perform the above-mentioned duties on a repetitive basis. The complexity of the bookkeeping system is based on the business size and quantity of transactions on a daily, weekly, and monthly basis.

Now let us study the functions of an accounting-based work.

Accounting Functions

This includes the process of analyzing, interpreting, reporting, and summarizing the financial recorded entered by bookkeepers. An accountant’s responsibilities includes the following but are not limited to:

  • Prepare to adjust entries including earned revenue or incurred expenses that have not been recorded in the bookkeeping stage.
  • Prepare financial statements on the condition and performance of the company.
  • Create management reports to address specific issues.
  • Analyze operations costs and assist in the company’s budget.
  • Compile tax returns from the financial data.

Accounting processes and its mode of working helps the business owners to understand the financial health of their organization. It also assists them to measure the growth and financial success of the firm.

What is more important?

While knowing the difference between bookkeepers and accountants, the business owners would be able to judge their requirements to make more informed decisions.

However, it is even more important to note that with the usage of software solutions, the traditional boundary between bookkeeping and accounting have indistinct. In present times, bookkeepers can also handle the accounting tasks than just recording transactions. Additionally, they can also classify and generate reports based on available financial data.

Summing Up, knowing about the differences between accounting and bookkeeping can help businesses with judging the daily bookkeeping transaction postings, cash flow management, generate financial reports, create budgets, and perform sales tax reporting. This will help the business owners to handle and understand their business with a new perspective altogether.

 

For more information please contact us on ankit.mehta@ascendum.com.au

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