Simple Breakdown: The Difference Between Accounting and Bookkeeping

135 3 minutes read

The difference between accounting and bookkeeping should be understood in order to place the right person in the right position. How efficient financial management is also based on basic knowledge of accounting and bookkeeping. Here are the differences that need to be understood so that financial decision making is also easier.

List of The Difference Between Accounting and Bookkeeping

Abilities and Responsibilities

In terms of abilities and responsibilities, accounting has several things that are different from bookkeeping, including:

Communication and reporting (communicating complex financial information to a variety of stakeholders).
Financial analysis
Financial modelling and forecasting
Financial statement preparation
Internal controls and audits
Tax preparation and compliance

Meanwhile, bookkeeping has different functions and skill requirements from accounting which include:

Account management
Basic financial reporting (generating basic financial reports)
Communication (communicating with clients and internal teams regarding financial matters)
Data entry and accuracy
Payroll processing (managing payroll functions and calculating salaries, deductions, and taxes.
Software proficiency

Definition

From the definition, both have differences that need to be understood before entering this field. Accounting is a broader process than bookkeeping which includes analysis and classification to reporting along with interpretation of financial data. While bookkeeping is the financial transactions recording done systematically as a basis for the accounting process.

Purposes

Bookkeeping vs. accounting need to be understood regarding their different purposes even though they’re still in the same field. Bookkeeping is the process of recording finances where all transactions are chronologically and systematically recorded. The results of this accurate recording are then needed for a broader accounting process.

Accounting isn’t just about recording the amount of money including income and expenses as well as profit and loss. The goal is to provide a detailed and comprehensive picture of the financial condition of a person/business. From this picture, you’ll find it easier and wiser to make the best decisions for your personal/business finances.

Scope

Bookkeeping is more limited in scope than accounting because it only records daily transactions chronologically. Bookkeeping is included in the accounting process and the process includes income and expenses as well as payments and receipts. Meanwhile, accounting includes bookkeeping to grouping and reporting to financial statement analysis.

Credentials

Accounting or bookkeeping that require certifications to enhance your resume and demonstrate expertise? Certifications are highly recommended in accounting and are almost mandatory because they can impact career advancement. Bookkeeping, on the other hand, doesn’t really require certification, although it can add value to your resume.

Education

Accountants need a bachelor’s degree in accounting to pursue a career in accounting at various companies. While to become a credible accountant with the right skills, a specific bookkeeping certification is sometimes required. However, accountants do not always need to have this certification because their skills already include bookkeeping.

Executors

The accounting process can only be done by an accountant or someone with a bachelor’s degree in accounting. While bookkeeping can be done by a bookkeeper without requiring special certification. Accountants can also do bookkeeping when they have obtained certain bookkeeping knowledge or certification.

Output and Results

Understanding the difference between accounting and bookkeeping makes it easier for you to move in this field of work. In terms of results from bookkeeping, it’s in the form of transaction records such as journals to the general ledger. While the results of the accounting process are in the form of complete financial reports and analysis.

Decision Making

Bookkeeping is done only based on transaction evidence to be recorded in full without missing anything. Errors in bookkeeping or inaccuracies will affect the analysis and financial reports during the accounting process. This also has an impact on the final decisions made by management in business.

Meanwhile, accounting uses bookkeeping as a basis for information to make strategic decisions. Accounting provides relevant information for making the right business decisions in order to achieve profit. Without accurate financial reports, decisions taken have the potential to be wrong and detrimental to the business.

The difference between accounting and bookkeeping is the basic knowledge needed to understand the roles and responsibilities. Understanding the differences also makes it easier for companies to meet tax obligations and comply with applicable regulations. This is also useful in avoiding errors and fraud by detecting fraudulent transactions early on.

135 3 minutes read