As someone heading a small business of your own, you must have a lot on your plate, and that is exactly why you should know the subtle differences between accounting and bookkeeping, all the more. In fact, we often come across business owners who wish to know the difference and rightly so. Knowing the difference is the key to making important decisions as well as for finance management.

Before we dive into the specifics, let us give you a brief idea about it. Although accounting and bookkeeping are the two pillars of financial management, they serve different goals. If we had to put it in simple terms, we would call bookkeeping the process of maintaining the records/ books of accounts, while accounting can be termed as the process of recording all financial transactions and analyzing it.

Bookkeeping and accounting: The basics!

As you might have guessed already, bookkeeping is tracking the everyday financial transactions. For this, a bookkeeper may simply use any online bookkeeping software. People working as bookkeepers may not need specific certifications to land this job, but he or she has to be extremely organized.

As for accounting, you’d need trained professionals – people who can offer a quick summary of the company’s financial realities. So, accountants depend much on the financial data from bookkeepers to track down larger trends and the way the money works in the business.

The key differences between bookkeeping and accounting

Both bookkeepers and accountants need to be good with numbers, but the former should be able to spot even the smallest issues with daily expenses. Here’s more on how bookkeeping and accounting are different.

• While the main objective of bookkeeping is to come up with the original books of accounts, the objective behind accounting is to record, analyze, and interpret the transactions.
• Bookkeeping is all about recording the data, and so, it literally does not show the financial position of the business. On the other hand, accounting shows the net results, including the profit earned, the assets, as well as the liabilities.
• While bookkeeping follows all basic accounting principles/ concepts, accounting methods of interpretation and reports vary from one company to another.
• Bookkeeping is more of a clerical job, often being considered a pretty basic work, whereas accounting involves low, medium, and even the top brass of the business.

Bookkeeping is thus used to manage the employee payrolls, tracking invoices from vendors and contractors, and keeping track of various bill payments. Accounting on the other hand, is all about budget management, managing tax filing and returns, and analyzing business operations.

Key takeaway

Both bookkeeping and accounting are critical for the financial health of your business. Luckily, with Basta & Company by your side, you can rest easy! Our team of experts track your expenses and every move, so that you can make informed decisions for your business. Afterall, if you only focus on the expenses and don’t understand the big-picture, you’d miss out on varied strategic opportunities.

Give us a call at Basta & Company for a dedicated team of CPAs working for your brand and guiding you through every step of the way.