Accounting vs. Bookkeeping

Accounting vs Bookkeeping

Most often small business owners and entrepreneurs get confused when talking about bookkeeping and accounting. Although the functions and tasks may overlap at times, there are key differences between bookkeeping and accounting that all entrepreneurs and business owner’s should know about.

What is bookkeeping?

In a general sense, bookkeeping is the process of compiling and organizing a company’s daily financial transactions consistently and making sure a company’s books are updated and kept accurate in an organized manner. Once a bookkeeping system is in place, business owners are able to keep track of their finances effortlessly.

Bookkeeping tasks generally include, but are not limited to:

  • Accurately recording financial transactions
  • Dealing with invoices
  • Posting and keeping track of debit and credit entries
  • Running payroll
  • Maintaining the general ledger

A general ledger is a document that a bookkeeper can record receipts from sales and expenses on.

What is accounting?

Whereas bookkeeping mainly consists of gathering financial data and information about a company, accounting is the process that deals with interpreting the information that is collected. The purpose of accounting is to provide the business owner’s with a more better understanding of their business to help with anything from strategic tax planning to financial forecasting.

Accounting tasks generally include, but are not limited to:

  • Preparing financial statements
  • Analyzing and examining costs, revenues and profits
  • Computing and preparing tax turns
  • Improving business efficiency

When should I get a bookkeeper?

The sooner the better. Investing in a bookkeeping system to manage your business financials will ultimately allow you to focus on the aspects of business that you are more passionate about, and will ultimately help your business grow. With the growth of financial accounting softwares, the line between bookkeeping and accounting is becoming more blurred. For example, some bookkeeping solutions are able to create financial statements as well as performing regular bookkeeping tasks, giving small business owners additional insights on their finances.