Bookkeeper or Accountant – Which Do I Need and What is the Difference?
Your Business May Require Both
What are the differences between a bookkeeper and an accountant, and similarly the differences between bookkeeping and accounting?
Usually, an accountant performs accounting, and a bookkeeper performs bookkeeping. But in some cases, a bookkeeper in Hoffman Estates is called an accounting technician, a bookkeeper accountant, or a payroll bookkeeper. And certainly, an accountant is able to do bookkeeper duties.
Understanding the differences concerning bookkeeping and accounting will help clear up both the titles and the service areas your business needs.
Bookkeeping
In large companies, bookkeeping is performed by departments such as Accounts Receivable, Payroll, and Accounts Payable. Those who perform these duties tend to be referred to as clerks. In small companies, one person may be responsible for doing all the bookkeeping. This person might perform the entire process or might enter the data and hand it off to an accountant.
All bookkeeping tasks are mechanical by nature. The functions are usually cyclical, occurring on a monthly basis, and are made up of entering transactions, making adjustments, and preparing reports. Accounts Payable includes entering all purchase orders or bills and recording all checks. Accounts Receivable includes recording all payments from customers, preparing all invoices, and entering all sales.
A comprehensive bookkeeper does it all and in addition compiles the data into the General Ledger and prepares financial statements. A bookkeeper does not perform analysis of the company’s financial records.
Accounting
The accounting process begins with designing and implementing the bookkeeping system, then overseeing it, and interpreting the results. Accounting is less mechanical and more subjective in nature than bookkeeping.
The bookkeeping system needs to be set up expressly to benefit the business by capturing and calculating useful data in a way that will be easy for the person who is entering the data. Every month, the accountant makes sure the system is working correctly and presents financial statements which aid in management’s decisions and understanding of the financial well-being of the company.
Accountants usually supervise the bookkeepers in large companies because of their extensive knowledge of the bookkeeping system and tasks. The entire accounting and bookkeeping functions are overseen by the Controller.
All of the roles in the accounting and bookkeeping process are performed by one person in a small business. That person is often hired from an accounting firm, and is not an employee of the company. Typically the bookkeeping is performed in-house, and an outside accountant analyzes the financial health of the business and oversees the work of the bookkeeper.
In any case, the accountant is going to make adjusting entries and prepare the company’s financial statements. An accountant helps small business owners to understand the financial impact of past and future decisions. To learn more about the differences between bookkeepers and accountants, go here.