Bookkeeping vs Accounting: 3 Differences You Should Know

When you’re running a business, managing business finances is one of the most important tasks, so it makes sense that you might use the terms bookkeeping and accounting interchangeably. While those functions are similar, there are key differences between the two that are important to understand, which is why we at Taurus CPA are here to help. In this post, we’ll go over the three main differences between accounting and bookkeeping that you should know.

 

Scope of Work

Bookkeeping involves keeping track of a business’s financial transactions that occur daily. These include sales, purchases, managing bank accounts and credit cards, and making sure everything adds up. It’s basically the process of keeping a close eye on the money flowing in and out of the business every day. On the other hand, accounting takes a broader view and involves analyzing and interpreting financial information to help make strategic decisions. Accountants use data provided by bookkeepers to create financial statements, develop budgets, and make recommendations on how to improve the business’s financial health. Instead of focusing on the day-to-day finances, they look at the bigger picture and plan for the future.

 

While bookkeeping is just one part of accounting, it is an essential one as it provides the accurate and up-to-date information that accountants need to make informed decisions. Bookkeepers provide the raw data that accountants use to understand a business’s financial situation and make an accurate plan. In short, bookkeeping and accounting work together to ensure the financial success of a business. Bookkeepers keep the day-to-day finances in order, while accountants take a more strategic approach and help guide a business toward a prosperous future.

 

Skill Sets

While bookkeepers still need to understand basic accounting principles, bookkeepers require less expertise than accountants and don’t need to be certified accountants. On the other hand, accountants have a much deeper understanding of financial analysis and interpretation, which requires more education and training. Most accountants hold a bachelor’s degree in accounting or a related field, and many choose to become certified public accountants, which involves passing a rigorous exam and passing specific experience requirements. 

While both accountants and bookkeepers are important for managing the finances of a business, accountants have a wider range of expertise and skills and can provide a more detailed financial analysis and offer ways to improve a business’s financial health. In contrast, a bookkeeper focuses on keeping track of daily financial transactions. 

Legal Requirements

Accounting requires complex decision-making and financial analysis capabilities, which may lead to more legal requirements than bookkeeping. While both roles are crucial for managing business finances, bookkeepers aren’t typically held to the same standards as certified accountants. Accountants need a CPA license to provide their services, and their financial statements may be audited by outside entities, such as the IRS or other regulatory bodies.

 

Contact Us

Whether you’re looking for a bookkeeper or an accountant, Taurus CPA is here to help. We understand that managing finances is one of the most crucial tasks when running a business, and it helps to have someone with the knowledge and experience to help keep your business financially healthy. If you need an accountant to work with your business, contact the experts at Taurus CPA today to learn more and get the financial guidance your business needs to thrive.