Bookkeeper
BOOKKEEPER OR ACCOUNTANT – WHAT’S THE DIFFERENCE AND WHICH DO I NEED?
YOUR BUSINESS MAY NEED BOTH
What are the differences between a bookkeeper and an accountant, and similarly the differences between bookkeeping and accounting?
Usually, a bookkeeper performs bookkeeping, and an accountant performs accounting. But occasionally, a bookkeeper is called a payroll bookkeeper, a bookkeeper accountant, or an accounting technician. And certainly, an accountant can perform bookkeeper duties.
Understanding the differences between bookkeeping and accounting will help clear up both the titles and the services your business needs.
BOOKKEEPING
In large companies, bookkeeping is performed by departments such as Accounts Payable, Accounts Receivable, and Payroll. The people who perform these duties are often referred to as clerks. In small companies, the bookkeeping may all be done by just one person. This person might perform the entire process or might enter the data and hand it off to an accountant.
All bookkeeping tasks are mechanical by nature. The processes are typically cyclical, occurring every month, and consist of entering transactions, making adjustments, and preparing reports. Accounts Payable includes entering all purchase orders or bills and recording all checks. Accounts Receivable includes entering all sales, preparing all invoices and recording all payments from customers.
A comprehensive bookkeeper does it all and also compiles the data into the General Ledger and prepares financial statements. A bookkeeper does not perform analysis of the company’s financial records.
ACCOUNTING
The accounting process begins with designing and setting up the bookkeeping system, then monitoring it, and interpreting the results. Accounting is less mechanical and more subjective in nature than bookkeeping.
The bookkeeping system should be set up specifically to benefit the business by capturing and calculating useful data in a way that is not overly burdensome to the person doing the data entry. Every month, the accountant ensures the system is functioning properly and presents financial statements which aid in management’s decisions and understanding of the financial well-being of the company.
Because of their intimate knowledge of the bookkeeping system and tasks, accountants usually supervise the bookkeepers in large companies. The Controller oversees the entire accounting and bookkeeping functions.
In small businesses, one person often performs all the roles in the accounting and bookkeeping process. That person is often hired from an accounting firm, and not an employee of the company. Sometimes the bookkeeping is done in-house, and an outside accountant analyses the financial health of the business and oversees the work of the bookkeeper.
Either way, the accountant will make adjusting entries and prepare the company’s financial statements. An accountant helps small business owners to understand the financial impact of past and future decisions.