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Accounting | Versus

The Difference Between Accounting and Bookkeeping

Published January 15, 2024

Published Jan 15, 2024

Tim Yoder, Ph.D., CPA

REVIEWED BY:
Tim Yoder, Ph.D., CPA

Danielle Bauter

WRITTEN BY:
Danielle Bauter

This article is part of a larger series on Bookkeeping.

Table of Contents

Accounting and bookkeeping are related processes in the field of financial management, but they differ in their scope, tasks, and focus. While bookkeeping is primarily about recording transactions and maintaining accurate records, accounting involves a more comprehensive analysis of financial data to support strategic decision-making for businesses and organizations.

Accounting
Bookkeeping
What It Is
Is more transactional and operational, focusing on accurate recordkeeping
Involves a broader, analytical role, with a goal of interpreting financial data to support informed decision-making
Objective
Monitor the financial situation and communicate that to owner and/or stakeholders
Maintain accurate records of all financial transactions
Management’s Decision-making
Can make business decisions based on data provided by accountant
Can’t make business decisions based on data provided by bookkeeper
Financial Statement Preparation
Prepared during the accounting process
Usually generated using accounting software
Analysis
Utilizes bookkeeping data to analyze and interpret data
Doesn’t typically require any analysis
Accountant vs Bookkeeper
Accountants can be considered bookkeepers
Bookkeepers can’t be accountants without proper certification

Key Differences Between Accountants vs Bookkeepers

Bookkeeping is like the foundation, ensuring the financial data is accurately recorded and organized. Accounting builds on this foundation, using the data to provide insights, analyze trends, and support strategic decision-making. Bookkeepers are also involved in the day-to-day tasks, while accountants are looking at the bigger picture.

Here are the key differences between accountants and bookkeepers:

Accounting
Bookkeeper
Scope
  • Encompasses a broader scope, including interpreting, classifying, analyzing, and reporting financial information
  • Uses data provided by bookkeepers to create financial statements to provide insights
  • Is involved in the systematic recording of day-to-day financial transactions
  • Focuses on maintaining accurate and organized records
Responsibilities
  • Has higher-level tasks, such as budgeting and forecasting, preparing financial statements, and conducting audits
  • Focuses on interpreting financial data and offering insights
  • Is primarily responsible for data entry, maintaining ledgers, reconciling accounts, and ensuring accuracy
  • Focuses on the routine and operational aspects of financial transactions, including invoicing customers and paying vendors
Analysis vs Recording
  • Analyzes financial data to provide insights into a company’s financial health
  • Uses the recorded data to create reports, identify trends, and support decision-making
  • Focuses on recording financial transactions accurately
  • Follows established processes to document transactions without necessarily interpreting the broader financial implications
Time Horizon
  • Takes a more strategic and long-term perspective, involving tasks such as budgeting, forecasting, and financial planning
  • Focuses on the immediate and short-term financial activities of a business, recording transactions as they occur
Decision-making
  • Provides financial insights and recommendations to aid management in strategic decision-making and planning for the future
  • Primarily supports the day-to-day operational activities and compliance
  • Records data used by accountants for decision-making

What Does Each Do?

Accountants play a more comprehensive and analytical role in managing financial information compared to bookkeepers. Their responsibilities extend beyond recording transactions, encompassing tasks related to financial analysis, reporting, and strategic decision-making. Here are key duties typically associated with the role of an accountant:

  • Conduct financial analysis: Conducting in-depth analysis of financial data to identify trends, patterns, and anomalies as well as providing insights into the financial health of the organization and suggesting areas for improvement.
  • Budget and forecast: Collaborating with management to develop budgets and financial forecasts that guide decision-making and resource allocation.
  • Ensure tax compliance: Ensuring compliance with tax laws and regulations and developing tax strategies to optimize the company’s tax position and minimize liabilities.
  • Prepare financial statements: Adjusting financial information provided by the bookkeeper to produce final financial statements, including comprehensive footnotes that are compliant with Generally Accepted Accounting Principles (GAAP).
  • Participate or oversee audits: Participating in or overseeing internal and external audits to ensure the accuracy and integrity of financial records and addressing audit findings to implement corrective actions if needed.
  • Develop financial strategies: Assisting in the development of financial strategies to achieve organizational goals and providing financial insights to support strategic decision-making by management.
  • Assess risk: Assessing financial risks and proposing strategies to mitigate them as well as establishing and monitoring internal controls to safeguard financial assets.
  • Provide advisory services: Offering financial advice to management on various business matters, such as investment decisions, mergers and acquisitions, and expansion plans.
  • Offer specialized accounting: Depending on the industry and organization, accountants may specialize in areas such as forensic accounting, managerial accounting, or government accounting.

A bookkeeper plays a vital role in the financial management of a business by recording and organizing financial transactions. Here are the primary responsibilities and tasks typically associated with the role of a bookkeeper:

  • Record transactions: Documenting financial transactions, including sales, purchases, receipts, and payments, in an organized manner.
  • Maintain ledgers: Keeping detailed records in general ledgers (GLs), which are categorized by accounts, such as cash, A/R, and A/P. This used to be done with a paper ledger but is now almost always done using accounting software.
  • Reconcile accounts: Ensuring that the entries in the bookkeeping system match the corresponding bank statements and other financial records. Reconciliation helps identify discrepancies and errors.
  • Manage payroll: Processing payroll, calculating wages, taxes, and other deductions, and ensuring accurate and timely payments to employees.
  • Generate financial reports: Preparing basic financial reports, such as income statements and balance sheets, to provide a snapshot of the company’s financial position.
  • Monitor cash flow: Tracking the inflow and outflow of cash to maintain liquidity and ensure that the business has sufficient funds to meet its obligations.
  • Handle A/R and A/P: Managing invoices and payments from customers (A/R) and processing bills and payments to vendors (A/P).
  • Use accounting software: Utilizing accounting software to streamline bookkeeping processes and maintain accurate and up-to-date financial records.
For more information about a bookkeeper’s duties, check out our article on what bookkeeping is and what a bookkeeper does.

Common Qualifications To Be a Bookkeeper vs Accountant

The qualifications for becoming a bookkeeper and an accountant can vary, but there are some general trends and common requirements for each role as summarized below.

Bookkeeper
Accountant
Education
  • High school diploma or equivalent, plus some bookkeeping training or certificate
  • Some employers may require an associate degree in accounting or bookkeeping
  • A bachelor’s degree in accounting, finance, or a related field is typically required
  • Advanced degrees, such as a Master of Business Administration (MBA) for career advancement or specialized roles
  • Most states require 150 college hours (roughly the equivalent of a master’s degree) to become a certified public accountant (CPA)
Skills
  • Strong organizational skills and attention to detail
  • Proficiency in basic mathematics
  • Knowledge of bookkeeping principles and practices
  • Familiarity with accounting software like QuickBooks
  • Strong analytical and problem-solving skills
  • Knowledge of accounting principles (GAAP), financial reporting, and taxation
  • Proficiency in accounting software
  • Excellent communication skills
Experience
  • Entry-level positions may not require prior experience, but relevant experience can be beneficial
  • On-the-job training or internships may be common for entry-level roles
  • A certain amount of relevant work experience may be required, especially for more senior or specialized positions
  • Internships or entry-level accounting roles can provide valuable experience
Certification
  • While not always required, obtaining the Certified Bookkeeper (CB) designation can be helpful
  • The CPA designation is one of the most widely recognized certifications
  • Others include chartered accountant (CA) certified management accountant (CMA), and certified internal auditor (CIA), depending on the path

To learn more about the basics of accounting and bookkeeping, read our Accounting 101 article.

Frequently Asked Questions (FAQs)

The comparison between accounting vs bookkeeping is not about determining which is better, as they are complementary functions within the financial management process. Both bookkeeping and accounting play crucial roles in maintaining accurate financial records, but they have distinct focuses and responsibilities.

Yes, a bookkeeper can become an accountant through further education, training, and professional development. While bookkeeping and accounting are related fields, they have different scopes and responsibilities. It’s important to note that specific requirements for becoming a certified accountant can vary by region and country, so individuals should research and comply with the relevant regulations and educational standards in their area.

Generally, accountants tend to earn higher salaries than bookkeepers. This is because accountants typically have more advanced education, skills, and responsibilities compared to bookkeepers. Accountants are often involved in more complex financial tasks, such as financial analysis, budgeting, forecasting, and preparing financial statements. Their role extends beyond recording transactions to interpreting financial data and providing strategic insights to businesses.

Bottom Line

For small businesses or individuals, bookkeeping might be sufficient to manage day-to-day financial activities. As businesses grow or face more complex financial situations, the need for accounting becomes crucial for strategic planning and compliance.

About the Author

Danielle Bauter

Find Danielle OnLinkedIn

Danielle Bauter

Danielle Bauter is a writer for the Accounting division of Fit Small Business. She has owned Check Yourself, a bookkeeping and payroll service that specializes in small business, for over twenty years. She holds a Bachelor's degree from UCLA and has served on the Board of the National Association of Women Business Owners. She also regularly writes about business for various consumer publications.