Many people struggle to differentiate between bookkeeping and accounting. They use the job titles bookkeeper and accountant interchangeably.

It’s not hard to see why this confusion occurs. Both bookkeepers and accountants manage financial data, have insight into their companies’ cash flow, and are tasked with the responsibility of maintaining accurate financial records. Though your bookkeeper and accountant may have shared goals and overlapping responsibilities, they support your business in different ways.

What is Bookkeeping?

Bookkeeping is the process of recording and maintaining a business’s financial transactions in its original book of entries on a regular basis. The bookkeeping function involves summarizing and organizing all financial transactions chronologically.

It focuses on the day-to-day activities of the business. A bookkeeper reviews the business’s daily transactions, bank statements, income statements, and accounts receivable and payable.

What is Accounting?

Accounting is the process of recording, interpreting, analyzing, and communicating information about the financial transactions of a business. It involves preparing financial statements that help evaluate the financial health of the business.

One of the several responsibilities of an accountant is to consolidate financial information to make it easy to understand for different stakeholders. Top management uses accounting information to create future policies and make important business decisions. Accurate information paves the way for better decision-making.

Accounting Vs. Bookkeeping

Here are some differences between accounting and bookkeeping that we have identified during our experience working with businesses in Santa Rosa.

  • Bookkeeping is the base of accounting. Accounting involves using the information provided by bookkeeping to prepare financial statements such as income statements, cash flow statements, and balance sheets.
  • Bookkeeping is an essential part of the accounting process. Accounting starts where bookkeeping ends and has a broader scope than it.
  • The information provided by bookkeeping is not sufficient for decision-making. Accounting provides the information that top management requires to make business decisions.
  • Bookkeeping does not involve preparing financial statements. Preparing and analyzing financial statements is the most important goal of accounting.
  • The objective of bookkeeping is to maintain accurate records of all financial transactions. The objective of accounting is to analyze financial information and assess the financial health of the business and then communicate the information to top management.

What Does a Bookkeeper Do?

Your bookkeeper is responsible for:

  • Entering financial information into your system
  • Recording business expenses and then comparing them to purchase orders
  • Managing invoices and receipts
  • Managing payroll

What Can an Accountant Do For Your Business?

An accountant is tasked with the responsibility of:

  • Managing all accounting transactions
  • Preparing budget forecasts
  • Preparing and publishing financial statements in accordance with the established guidelines
  • Reconciling accounts receivable and payable
  • Computing taxes and preparing tax returns
  • Managing month-end, quarter-end, and year-end closings
  • Ensuring regulatory compliance

Virtual Jeannie Bookkeeping Services is a reputable bookkeeping firm in Santa Rosa. Our bookkeeping solutions take the guesswork out of bookkeeping. To talk to one of our bookkeepers, call (707) 664-1425.