Bookkeeping vs. Accounting: What Are The Differences?

Bookkeeping vs. Accounting: What Are The Differences?

Whether you are the owner of a small handmade crafts store or a large software enterprise, you probably know the importance of having a bookkeeper or an accountant to help streamline your company’s finances, as they are essential for any business.

Although bookkeepers and accountants have to handle the finances of a business, these professions actually have significant differences. However, it is common to see the two terms used interchangeably, leading to confusion about how a bookkeeping service differs from an accounting service. Let us help clear the confusion by providing a breakdown of the daily roles of a bookkeeper and an accountant.

What is bookkeeping?

Bookkeeping is the process of recording and organising all the financial transactions that happened in the course of running a business. A bookkeeper’s primary responsibility is to track the financial activities of a company and to make sure that all transactions and records are correct and complete.

Accurate bookkeeping is fundamental in a business. It is particularly crucial to business owners, investors, financial institutions, and the government. These people and organisations need access to reliable financial information to make wiser investments or business decisions, and accurate bookkeeping provides them with such data in a professional and organised way.

What are the duties of a bookkeeper?

Bookkeepers handle and document all the financial transactions for their companies. Without them, organisations will be unaware of their current financial position. Their primary role is to deliver accurate financial information that can be understood by business owners and those empowered to make decisions for a company.

Here are the most common day-to-day functions of a bookkeeper:

  • Prepare the organisation’s cashflow statement
  • Maintain the business’s balance sheet
  • Process company payroll
  • Maintain the company’s annual budget
  • Prepare the organisation’s income statement

What is accounting?

When bookkeeping ends, accounting begins. Accounting involves the process of recording, summarising, analysing, consulting, and reporting the finances of a business. An accountant’s primary responsibility is to analyse, classify, and interpret the data and financial information recorded and organised by the bookkeeper.

In essence, accounting is a more subjective process that gives businesses interpreted data and insights based on bookkeeping information. It is a high-level process that uses the financial information obtained during the bookkeeping stage to produce financial models that help companies grow.

What are the duties of an accountant?

Accountants spend most of their work hours collecting, analysing, and evaluating financial data. They monitor business expenditure and budgets, and they audit and analyse financial performance. In addition, they are responsible for financial forecasting and risk analysis. Because their job involves more complex functions, accountants must undergo rigorous training and standardised tests to become certified public accountants.

Here are the usual tasks of an accountant:

  • Record and categorise the company’s expenses
  • Analyse financial data to make recommendations
  • Conduct risk analysis evaluation
  • Manage the business’s tax returns
  • Find and tackle any discrepancy in the company’s accounts
  • Offer advice to companies on incorporation matters

Conclusion

Although these two terms are commonly interchanged, bookkeepers and accountants play significantly different roles in a business. While bookkeepers focus on recording and organising financial information, accountants are more concerned with interpreting and analysing those pieces of data compiled by the bookkeepers. Nonetheless, despite their distinct functions, both roles are essential in maintaining the financial health of a business.

As an entrepreneur, you will require a bookkeeper and an accountant to keep accurate track of your company’s finances while ensuring your accounts comply with IRAS’s guidelines. However, hiring applicants to fill both roles can be expensive, especially when your company is just starting and money is tight. In this case, it is advisable to outsource your accounting and bookkeeping needs to a specialised audit firm that can handle both responsibilities.

At Ackenting Group, we offer a suite of accounting and bookkeeping services to meet your company’s needs. We can provide your business with timely and accurate financial reports to ensure you stay on top of your company’s finances. In addition, we offer a wide range of corporate services, including quick and easy incorporation services for entrepreneurs looking to start their businesses in Singapore.

If you require any assistance on accounting services, feel free to drop us an email at johnwoo@ag-singapore.com or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.

div#stuning-header .dfd-stuning-header-bg-container {background-image: url(https://www.ag-singapore.com/wp-content/uploads/pexels-photo-24464-1-2.jpg);background-size: cover;background-position: center center;background-attachment: scroll;background-repeat: no-repeat;}#stuning-header div.page-title-inner {min-height: 550px;}