Bookkeeping and accounting may be two sides of the same coin, but they have their distinct roles to play within any business. If you have an accountant that tends to your business’s finances but doesn’t have a dedicated bookkeeper, you may be risking recording errors and faulty insights.
So, what is the core difference between bookkeeping and accounting? While bookkeeping focuses on the recording and maintenance of daily transactions, accounting analyzes that bookkeeping data and communicates its insights on a business’s financial position. They go hand-in-hand; and if bookkeeping records are inaccurate, it could risk faulty insights from your accountant. For this reason, it’s absolutely essential that your bookkeeping service is credible and trustworthy.
At NorthStar Bookkeeping, we’ve been helping businesses maintain accurate financial records and make sensible, data-driven business decisions for the past decade approximately. From bookkeeping and reporting services to acting as your trusted advisor, our outsourced service can cover every angle of your bookkeeping needs.
In this blog we’ll dive in deeper to discuss the differences between bookkeeping and accounting, so read on to learn more.
What is Bookkeeping?
Bookkeeping involves recording day-to-day financial transactions for a business, alongside financial reporting that guides future decision-making.
It involves processing invoices, paying bills, tracking income and expenses, reconciling bank statements, and producing frequent financial reports and statements. All-in-all, bookkeepers ensure that business transactions are recorded accurately and on time, maintaining organized records that can be easily found and referenced.
Key Bookkeeping Activities
Bookkeepers have a range of responsibilities, starting with handling accounts payable and receivable. This includes paying vendor bills and invoices and collecting payments from customers, along with classifying transactions and recording them in your chosen accounting software.
Bookkeepers also reconcile bank accounts by comparing transactions in the general ledger to bank and credit card statements, which serves to protect your business against potential fraud or loss of funds. Lastly, your bookkeeper may act as a strategic consultant by providing insights into financial reports, allowing for informed, data-driven business decisions.
Bookkeeping Certifications
The Certified Bookkeeper (CB) credential demonstrates a bookkeeper’s mastery of best practices and requires at least two years of full-time bookkeeping experience alongside passing four robust exams. The American Institute of Professional Bookkeepers also offers continuing education to maintain the CB designation.
What is Accounting?
As opposed to bookkeeping’s focus on maintaining organized records and keeping track of transactions, accounting involves summarizing financial transactions and preparing reports that communicate the business’s financial position.
Accountants will analyze your financial statements and explain what the numbers mean for the health of your business. Common certifications to practice as an accountant include the Certified Public Accountant (CPA) and Chartered Global Management Accountant (CGMA).
Key Accounting Activities
Accountants prepare timely and accurate financial statements such as balance sheets, income, and cash flow statements, and ensure that they comply with accounting standards such as GAAP. They may specialize in certain aspects of accounting, including tax accounting, auditing, risk management, budgeting, and forecasting. Many accountants also offer advisory services to help businesses streamline their operations and function more efficiently.
Accounting Certifications
A Certified Public Accountant (CPA) license demonstrates extensive expertise in accounting, auditing, taxation, ethics, and business law. Another certification, the Chartered Global Management Accountant (CGMA) license, also exists to recognize expertise in global financial management, strategic decision-making, governance, and overall risk management.
Key Difference Between Bookkeeping and Accounting
While the two roles work closely together, there are notable differences between bookkeeping and accounting to be aware of:
- Bookkeeping focuses on recording daily transactions, while accounting involves financial analysis and highlighting insights within reports
- Bookkeepers handle routine activities within a 12-month accounting cycle, while accountants may provide strategic advice that spans decades
- Bookkeeping provides the raw data that accountants then interpret and summarize into useful information that guides sound business decisions
With a remote, outsourced bookkeeping service, you can maintain accurate records that translate to valuable financial insights while taking the stress of bookkeeping off of your plate.
The NorthStar Advantage
At NorthStar Bookkeeping, our services are a sort of hybrid between the consulting and analyzing portions of accounting, and the daily duties of bookkeeping. In other words, we can carry out your bookkeeping duties while performing many of the same duties as an accountant, from budgeting and forecasting to short- and long-term advising. However, we do not carry out tax preparation services.
Maintain Accurate, Up-to-Date Records with NorthStar
Free yourself from bookkeeping burdens with NorthStar Bookkeeping. Our team will manage your back-end financial administration in an accurate, timely manner so that you can focus on what matters most: running your business.
With NorthStar as your partner, you’ll gain financial clarity and confidence knowing that your accounts are precise and up-to-date. Don’t go it alone – trust NorthStar Bookkeeping to be the responsible, responsible partner you need for financial peace of mind.
Partner with NorthStar Bookkeeping for clarity and confidence in your financial records.