Differences Between Accounting and Bookkeeping

May. 18, 2020

Bookkeeping

Bookkeeping and accounting are essential steps to recoding business operations and transactions in any industry. Experts who carry out these services help the company keep track of its expenses, prevent fraud and embezzlement, and help business officials make critical business decisions.
Bookkeeping and accounting are very similar in nature, however, many confuse them to be the same thing. The two roles, however, are quite different. Here are the major differences between accounting and bookkeeping:

Varying definitions

The definitions of the two terms alone are quite different and it’s essential to understand this very difference. Bookkeeping is the process of recording financial transactions of a business on a daily basis. The recording process is made up of accumulating, organizing, and reporting the financial information. Bookkeeping is the basis of financial statement preparation of an entity and is vital for determining tax returns and other reports.
Accounting, on the other hand, is a more macro level aspect than bookkeeping. Its definition includes identification, recording, measuring, classification, verification, summarization, interpretation, and communicating financial information. The job therefore entails more than just keeping record of transactions.

Difference in objectives

Due to the difference in definition, the underlying objectives of the two are also distinct in their own right. The main objective of bookkeeping is to correctly record transactions in a chronological way. This information is then worked on by other officials of the business.
As for an accountant, their main goal is to determine the financial position of the company at any given point in time. They must be able to identify the financial health of the company and relay that information to various stakeholders. An accountant isn’t necessarily concerned with day-to-day activities of the business, but rather, more strategic activities.

Accounting tasks

Bookkeeping tasks

  • Recording all financial information of the business
  • Creating invoices and sending them out
  • Making records of payments
  • Setting up and maintaining the general ledger
  • Budgeting for the future
  • Preparing and managing cash flow
  • Cash flow forecasting
  • Streamlining daily processes of the business

    • Accounting tasks

  • Conducting audits
  • Filing tax returns
  • Tax planning
  • Provide business advice
  • Create financial models depending on the kind of business
  • Analyzing costs by comparing with previous years
  • Financial forecasting
  • Interpreting financial information recorded by bookkeepers
  • General insights

    • Faber is an accounting company based in Edmonton that provides services like tax planning consultancy as well as estate planning. Our experts are dedicated to help clients with their businesses. We’re there to help every step of the way to ensure quality service. Call us at 780-432-5262 to book an appointment with us.