While some people use the terms accounting and bookkeeping interchangeably, there is a difference between these functions in your business. People confuse these important business functions because of the similarities between bookkeeping and accounting. It is important for businesses to have strong bookkeeping and accounting functions in order to have better financial management. By understanding how bookkeeping and accounting differ from each other, you will be better able to avoid financial problems.
Bookkeeping vs Accounting
Bookkeeping involves keeping the books of a business. Bookkeepers record all of the financial transactions and financial documents of the business. Commonly, bookkeepers use software programs to assist them with recording the businesses’ financial affairs. They may also summarize and classify financial data. The importance of bookkeeping is that it helps to keep the records that businesses need. A bookkeeper’s job may include the following:
- Recording debits, payments and credits
- Reconciling all of the accounts
- Receiving and sending invoices
- Payroll tasks
- Mantaining historical accounts and ledgers
- Preparing internal reports
Accounting involves collecting, classifying and manipulating financial information for individuals and organizations. While accountants may perform some bookkeeping tasks, their jobs involve much more detailed work in analysis, reporting and advising. A business’s financial data will be analyzed, classified and interpreted for the benefit of the business. The importance of accounting to a business is getting insight into the business’s finances, making financial projections and making certain that the business complies with tax laws. An accountant may do the following:
- Preparing statements
- Completing the business’s tax returns
- Analyzing operational costs
- Giving business owners information so that they can understand the
- business’s finances and make financial decisions
- Establishing accounting functions
- Customizing reports and statements
- Creating budgets
- Making financial and cash projections
- Managing end-of-the-year finances
Bookkeepers record financial data, which is one component of accounting. Bookkeepers follow the orders that are given by accountants. Because these roles overlap, it is sometimes difficult for people to understand how the difference between bookkeeping and accounting. Many accountants complete bookkeeping tasks, and many bookkeepers go on to become accountants. The team at Thomas M. DiTullio Accounting offers a full suite of bookkeeping and accounting services.
To learn more about how we can help your business with its financial needs, call us today to schedule your consultation.