Have you ever wondered what the difference is between bookkeeping and accounting? There are some specific distinctions, whether the roles are performed by the same person or not. To understand the differences, it’s important to start with the business financial process.
The accounting process starts with recording financial transactions. This is the foundation of the financial process, and if done incorrectly, affects the entire health of the business. If your foundation is off, the whole house might fall in. This is the role of the bookkeeper. Bookkeepers do not interpret or analyze data, but record, classify, report, and summarize, usually by utilizing accounting software. Bookkeepers who also provide financial reports are referred to as full charge bookkeepers.
Accounting involves interpreting, classifying, analyzing, reporting, and summarizing financial data. Notice that bookkeepers don’t interpret or analyze – those roles are handled entirely by accountants. Accountants are involved in all parts of the accounting process. While both bookkeepers and accountants must understand general accounting principles, accountants have gone through more in depth training to analyze and interpret the data. Why is this important? A bookkeeper who doesn’t have at least a general grasp of accounting will make costly mistakes. An accountant goes through rigorous training to enable them to provide information to business owners that help them make informed business decisions.
While bookkeeping and accounting may appear to be the same to most, and since though is some overlap between the two, they are not the same. From an educational standpoint, a bookkeeper can work with a few accounting courses. An accountant must have at least a bachelors’ degree in accounting, and in most cases holds a masters.
What about a CPA? Well, let’s dissect that a bit. CPA stands for Certified Public Accountant. They must pass a rigorous, four part exam (one of the most challenging in the professions, known to be even more difficult than the bar for lawyers or the boards for physicians), intern with a current CPA for a year, and then may apply for licensure. They may prepare taxes and provide bookkeeping and accounting services, but they are at their best serving public companies – that is, companies that are traded publicly on the stock exchanges. Privately held companies typically do not need that level of support, unless they’re preparing for IPO.
At Bookkeeping Made Simple, we qualify all of our bookkeepers and accountants. We provide all the financial services a new company might need, and can do so until it’s time for your company to be publicly traded on the exchanges.
I invite you to take us for a test run. Call 801-692-0032 today to find out more.