If you’ve caught yourself wondering what the difference between bookkeeping and accounting is, you’re not alone. While the terms are often used interchangeably, there are considerable differences between the two roles.
Oftentimes, bookkeeping is the first step to accounting, therefore, there is sometimes blurring between the two roles. Small businesses with limited financial resources will often assign bookkeeping and accounting duties to one individual.
On a surface level, the two professions carry a similar end goal: they manage finances through tracking financial data. However, bookkeepers are often responsible for keeping track and recording financial transactions, while accountants analyze and interpret this data.
While that is a simplified breakdown of the two roles, there is a lot more to bookkeeping and accounting. To achieve success in any business, tracking and interpreting finances is vitally important. If you don’t currently have a professional overlooking your personal or business finances, the team at Genesa CPA can assist with recording your spending and assist with finance management.
So, what exactly is bookkeeping and why is it so important?
What is Bookkeeping?
As previously stated, bookkeeping involves regularly recording a company’s financial transactions. Proper and thorough bookkeeping allows companies to accurately track their gains and losses to make key operating, investing, and financing decisions.
Bookkeeping is the first step to accounting and a crucial one at that. This initial step gets the documents ready by compiling and organizing transactions to lay a clear foundation for the accountants. Since companies have so many transactions to keep straight, it’s important to know the areas of revenue and loss, and to have this data accessible at a glance.
There are two divisions of bookkeeping: single-entry and double-entry.
For single-entry bookkeeping, each transaction is recorded with one entry in a log or journal. This is a very basic level of bookkeeping, suitable for some small businesses with limited transactions.
The more readily used form of bookkeeping is a double-entry system which records each financial transaction as two corresponding entries called a debit and a credit. This system allows bookkeepers to track their level of equity which is the sum of their liabilities from their assets. With each transaction, one account is debited, and the other is credited. When done properly, it’s easier to evaluate finances and locate points of error. As such, double-entry systems are the more popular form of bookkeeping.
What are the Roles of Bookkeepers?
What bookkeepers do vary client to client. While some offer more in depth services than others, such as making payments and managing payroll, a bookkeeper’s tasks depend on company need and resources. Some common tasks of bookkeepers are:
- Recording expenses
- Maintain annual budget
- Managing payroll
- Issuing invoices
- Processing payments
- Comparing balances in your books to bank transactions/ statements
- Tracking accounts payable (money you owe) to accounts receivable (money you are owed)
- Maintaining the general ledger using the double-entry debit/credit system
- Preparing four key financial documents: income statement, balance sheet, cash flow statement, statement of changes in equity
Why Your Business Needs Bookkeeping
Hiring a bookkeeper is great way to keep your finances in order. Here are some of the benefits that come with advising a trusted and professional bookkeeper:
- Receive a clear track of finances to improve budgeting decisions
- Easier time filing taxes
- Ensures that your business is audit-proof
- Demonstrates the seasonal flow of your business’s earnings and losses
- Clear statement of your financial health through tracking revenue, costs, and equity
- Keeps your focus on your core business needs
- Ensures timely payments, both internally and externally
At Genesa CPA, our team of professional accountants offer expert bookkeeping services to keep your finances in line. Our small business and tax accountants offer tailored services to fit the needs of your company. We strive to develop a great business relationship to work closely with you on your financial goals. Not only can we offer bookkeeping services, but our CPA accountants are fully qualified to manage your books and provide accounting solutions as well. Whether you’re looking for advice on corporate finance or tax planning to build your business, these complex financial matters are best handled by Genesa CPA. Reach out today to start improving the financial health of your business.