For a long time, the business world has experienced confusion in regards to the difference between bookkeeping and accounting. The job scope of a bookkeeper bears some resemblance with that of an accountant mainly because both of them work with financial data, some even consider bookkeeping as a subset of accounting. But it is important to understand the difference between accounting and bookkeeping, which are important roles in an organization.
Before the invention of bookkeeping software records were kept in books hence the name ‘bookkeeping.’ Bookkeeping is a very mechanical and strictly controlled process. Some of the tasks performed by a bookkeeper include recording transactions, journal entries, trial balance posting, worksheets, journal entry adjustments, making financials statements and closing financial books. Bookkeeping focuses its efforts on entering data and meticulously maintaining business records. Bookkeepers have the responsibility of ensuring that the data to be used by accountants is reliable.
Accounting, on the other hand, takes a broader perspective. Accountants design and monitor bookkeeping systems to ensure that bookkeepers gather the right data according to the business’s needs. They are obliged to present financial statements to their respective organizations on a monthly basis. Accountants are supposed to advise on business decisions to be taken after analyzing financial statements. Since accounting demands a full understanding of the bookkeeping process, its is a standard procedure for accountants to manage bookkeepers.
Bookkeeping is considered to be more of a clerical role as opposed to accounting which involves analyzing and reviewing tasks done by subordinates. Accountants are ranked higher in the organizational structure. They are members of the senior management team because of the impact they have on the company’s financial management.
In some countries, accountants are required by law to be members of a professional accounting bodies or associations. This is to ensure that proper ethics are maintained, and public interests are protected. For an accountant to competently perform his duties, then he must possess knowledge and experience as stipulated by these professional associations. Adherence to the rules set by these bodies is demanded of him otherwise he may face punitive actions such losing his license. Bookkeepers do not have this obligation, and their primary requirement is to have the necessary skills and probably a college degree or a diploma.
Due to the high analytical role performed by an accountant, he may choose to specialize in a particular area such as management, auditing or taxation. This is not possible for a bookkeeper because his role mainly involves collecting the right data for the company.
Due to the higher ranking position in the organization and the critical roles that they play, accountants are remunerated higher than bookkeepers, though this may vary with different companies. Most companies will contract accounting firms for the purpose of setting up their financial systems, and then employ bookkeepers to maintain clean records that are then transmitted back to the accounting firms for production of reports and analysis, with the aim of guiding the management in their decision-making processes. It is worth noting that some small organizations will hire one person to perform both bookkeeping and accounting tasks, in which case we refer to him as an accountant.