There have been many debates and discussions before about the difference between accounting and bookkeeping. But to set it straight, both are equally important to every business organization.
What is bookkeeping?
To explain it in simple terms, bookkeeping is the identifying, measuring and recording of financial transactions.
WHAT IS ACCOUNTING?
On the other side, accounting is the interpreting, classifying, analyzing, reporting and summarizing of financial data. Read article here for full definition about accounting.
Yes, both of them deal with financial data and require an understanding of basic accounting principles.
To an untrained person, both accounting and bookkeeping may look similar. But they are not. They refer to different sets of activities.
The objective of bookkeeping is to keep the records of all financial transactions properly and systematic. While for accounting, the goal is to gauge the financial situation and further communicate the information to the stakeholders.
In terms of decision-making, a business owner can’t just make a decision based on the data provided by bookkeepers. It is the accountant’s goal to help the business owner make sense of the financial data, summarize it and help in making critical business decisions.
As such, we can see that bookkeeping doesn’t require any special skill sets, as long as you understand how to record the transactions and keep the supporting documentations. Accounting requires special skills due to its analytical and complex nature.
Financial statements are normally not prepared from bookkeeping as the summarization and interpretation is performed by accountants.
Finally, bookkeepers are required to be accurate in their work and knowledgeable about financial topics. Bookkeepers work is usually overseen by an accountant. Accountants with sufficient experience and education can obtain the title of Certified Public Accountant (CPA).