Enter your email below to receive weekly updates from the Ashton College blog straight to your inbox.
It’s all about dollars and cents, but the roles bookkeepers and accountants play are actually quite different. Bookkeeping and accounting both serve to keep a business’s financial information recorded, accurate and reported, but how and when they do so is where the difference crops up even though there is often some overlap of roles.
Some business people will swear that their accountant is an essential part of their team, while other business people don’t use an accountant, yet rely heavily on their bookkeeper. Understanding the difference between bookkeeping and accounting is important not only for those in business, but also for those looking at taking accounting or bookkeeping courses.
A bookkeeper is primarily focused on day-to-day transactions such as invoicing, posting expenditures and ensuring ledgers are kept up to date. Posting sales and expenses into the general ledger (where amounts of these day-to-day transaction are recorded) is one of the bookkeeper’s main duties. In today’s business landscape, more bookkeepers use bookkeeping software to post the entries, but certainly “lower-tech” solutions like a basic spreadsheet or an actual ledger book can be used too.
While posting entries may sound easy, it becomes complicated by the size of the business and volume of transactions. When hundreds, even thousands, of transactions go through every day (think of retailers like Home Depot), the bookkeeping process can be incredibly detailed. Even customized software doesn’t replace the need for bookkeepers to oversee the process, though in a company setting a bookkeeper may have a different title like “accounts receivable” or “accounts payable” or even “entry posting” depending upon the number of people in the accounting department, the business’s need and the system in place.
Some bookkeepers will even do taxes for companies – generally those small in size. This is where overlap can occur as accountants will also prepare annual tax returns.
Accountants fall into a number of different categories with a range of designations. Some work to create better systems throughout an entire company or a range of companies (think CA), while another, with somewhat less education behind them may be more focused on the finance related issues (like a CMA). That being said, within the business setting and aside from overall business operational systems and processes that can benefit from an accountant’s expertise, the accounting role will encompass things like preparing financial statements, analyzing operational costs and expenses and understanding the impact of various financial decisions within the business. Here too, there is an overlap in that bookkeeping and accounting software often gives the bookkeeper the same tools as an accountant to create financial statements, but this is generally the case with smaller businesses as larger businesses will have more customized software rather than “out-of-the-box” solutions.
Accountants have a longer and deeper education process than a bookkeeper and as such, they have a larger part to play in the profitability and cash flow drivers within a business. They look to the bigger picture of how the transactions the bookkeeper works with impact and influence the future of the business.
Those running a business need to know the distinction between bookkeeping and accounting. Not only does it help with understanding what team members are needed for various roles, it also helps with making sure information can be accessed quickly and easily from the right source.
For example, if a general manager wants to know what the sales were on the long weekend, the bookkeeper can access the information on postings from the general ledger. Alternatively, if she wants to understand the depreciation on the fleet of cars purchased three years ago and whether adding five more to the fleet is a good idea, that would be a question for the accountant.
Bookkeepers and accountants have the flexibility of working for one company as their employer, for one or more companies (each on a part-time basis) as employees or may be self-employed and have a number of clients. Obviously, like other jobs, bookkeepers and accountants can try on one, or all, of these options throughout their careers to find the ideal fit.
As noted, accountants will have spent a greater amount of time going to school than bookkeepers. That volume of schooling goes up as the accountant moves along and earns other accounting designations. A CA will have greater educational investments, as well as other components like practicums, than a CMA. On the flip side, depending upon a bookkeeper’s job description and their background, they are likely to need two years or less of education. Taking a bookkeeping certification program can often be done in person or through online bookkeeping courses to make the educational aspect even easier.
Generally, courses in bookkeeping will involve areas like understanding the basics of various software programs, financial accounting (understanding financial statements and how to produce them), cost accounting (accounting for the production of goods), computerized bookkeeping, taxation and payroll. As you can see, the basics learned overlap with those that will be taught in accounting courses. The difference is that bookkeeping courses will not go as in-depth as the courses taught throughout the years of an accounting program, but still give the student plenty of knowledge to help their future employer or clients as a well-rounded bookkeeper.
Becoming certified through the Canadian Bookkeepers Association (CBA) is something those who take bookkeeping courses should consider. Many of the educational programs allow graduates to apply for their accreditation for designation with the CBA. It’s a distinction that will move students further along their career path than someone who does not have the designation.
Those who like the business of dollars and cents are bound to be interested in the fields of accounting and bookkeeping. Once the difference between the two is understood (along with the educational and time requirements), it’s easier to make a choice of what part of the financial business world to be part of. Becoming a bookkeeper may, in fact, be the first step towards the journey to becoming a CA if you find you’d like to grow into different roles in the future.