Accounting and Bookkeeping are words that often come up during the business process, and some may think that they actually mean the same thing. So what are the differences and similarities between them? Accounting and Bookkeeping are both essential business functions required for all businesses. In terms of Bookkeeping context, it is responsible for the entry of all financial transactions. In Accounting, it is responsible for interpreting, classifying, analysing, reporting and summarising financial data. The biggest difference between accounting and bookkeeping is that accounting are able to interpret the financial transactions and present them to the stakeholders for decision making but bookkeeping does not.
An Accountant will be in charge of the interpreting, classifying, analysing, reporting and summarising of financial data. To be a Certified Public Accountant (CPA), one has to obtain certification in the Association of Chartered Certified Accountants (ACCA). Whereas, a Bookkeeper does not need be certified or even have any prior experience, since there are existing software to enable them to perform the job. A Bookkeeper will only handle the data entry of the financial transactions. In the accounting process, the accountant will review and analyse the financial data to ensure accuracy of the financial transactions that the bookkeeper has recorded. An accountant might be required to do strategic financial planning or budget planning for the company.
Bookkeeping and accounting can appear to be the same profession to the untrained eye. Both are concerned with the handling of financial data. In small companies, a Bookkeeper or an accountant will be doing the work, such as data entry of financial transactions and generating of management reports. There is no need for the accountant or the bookkeeper to take part in the company strategic financial planning as the company is operating in a small setup. Therefore, some small companies usually do not recruit in house accountants to do data entry as their salary is much higher than that of a bookkeeper. Companies can also outsource the accounting process to an external accounting firm.