The differences between bookkeeping and accounting may seem minimal at first, but upon further inspection, the distinct role each plays in a business’s operations becomes clear.
They both function as an important part of a business’s financial success. The one you require for your specific task or company depends greatly on whether you’re looking at the day-to-day financial transactions or want to dive deep into the bigger picture.
This guide helps break down the differences (and similarities) between the two roles while also explaining why you should consider hiring both to support your business.
Bookkeeping vs. Accounting
Both roles have the option to work for a specific company or to provide freelance services. This flexibility allows them to offer financial support to a wide range of industries. These can include—but are not limited to—law, insurance, health, small businesses, and tax accounting firms.
Bookkeeping involves more transactional and administrative tasks. Handling the day-to-day elements of recording financial transactions, bookkeepers are responsible for tracking purchases, receipts, sales, and payments, among other things.
Bookkeepers are also typically responsible for recording journal entries and conducting bank reconciliations. A bookkeeper must be capable of shifting focus quickly, without making a mistake, to catch any errors in a budget or invoice.
Bookkeeping responsibilities can consist of the following:
- Recording financial transactions
- Posting debits and credits
- Producing invoices
- Preparing financial statements
- Maintaining and balancing subsidiaries, general ledgers, and historical accounts
- Completing payrolls
In addition, bookkeepers should be responsible for “posting”, which refers to keeping a general ledger where the amounts from sale and expense receipts get recorded. The more frequently your business makes sales, the more often your bookkeeper will need to post the ledger. Bookkeepers can create the ledger using a few different methods: specialized computer software, a computer spreadsheet, or a line sheet of paper.
The complexity of your bookkeeping system will depend on the size and scale of your business, as well as the number of transactions completed daily, weekly, and monthly. A bookkeeper should record every transaction in the general ledger and any necessary supporting documents.
Accounting, on the other hand, is responsible for providing business owners with insight based on information gathered during and interpreted from their bookkeeping.
Overall, accountants take the different data collected by bookkeepers and apply them to the broader picture, drawing necessary conclusions to support your business.
Accounting responsibilities can include:
- Preparing and adjusting entries
- Reviewing company financial statements
- Analyzing the cost of operations
- Completing income tax returns
- Aiding the business owner in understanding the impact of financial decisions
One of the key roles in accounting is analyzing various financial reports to help you make informed business decisions. Ultimately, this should result in business owners having a greater understanding of actual profitability and an awareness of the cash flow within their business.
Accounting essentially takes the information from the general ledger and turns it into a digestible snapshot of the business’s current progress. Business owners often rely on accountants for services such as tax planning, analyzing their financial position, and tax filing.
Located in Toronto, our agency uses a network of diverse employers to connect candidates with accounting jobs. At AHK Accounting Recruiters, we offer comprehensive advice and personal recommendations based on your personality, values, skills, experience, and goals.
What are the key differences?
Both bookkeepers and accountants can hold a post-secondary education—although it’s not required in all situations. A bookkeeper can be hired without existing credentials, depending on the business’s requirements and needs. A person in this position could work long enough as a bookkeeper at the same company to eventually make the gradual transition to accountant without attending additional schooling.
However, this path is incredibly uncommon within the two different fields. Typically, a bookkeeper will hold an associate’s or bachelor’s degree. After (or while) gaining experience working in the role, a bookkeeper can return to school to complete a degree in accounting or finance.
On the other hand, accountants require specialized training to work in their field. Most people interested in accounting should look into becoming a certified public accountant (CPA), which requires a separate exit exam. This designation is sought after by the majority of individuals who plan on becoming accountants.
The requirements for a CPA certification include a minimum of 150 post-secondary credits or the equivalent of a bachelor’s degree in accounting, and an additional 30 hours of graduate work. Most CPA candidates opt for completing a master’s degree as part of their certification process.
Our accounting agency understands that certain qualifications can appeal more to larger organizations than startups, or to particular industries more than others. Unique education and competitive experience can help showcase the drive of a young, hungry candidate.
For both bookkeeping and accounting, there is a wide range of starting salaries that an individual could make. These numbers usually depend on the particular stream or business they pursue. While accountants can earn a lucrative income over time, the initial starting salaries are often on the lower end compared to other industries.
The most lucrative branch for entry-level accountants is public accounting. That said, other sectors of the field may appeal more to a candidate for what they offer down the line.
Bookkeepers, however, typically work on an hourly basis as opposed to a salary. Their income level depends on how many hours they can accumulate throughout the year, and the rate set by either themselves or the business they choose to work for. Bookkeepers can expect to work extra hours during the busiest tax seasons—from January to mid-April.
We always focus on the ability of our candidates to showcase their unique qualifications, so that they can stand out to potential employers. As an accounting staffing firm in Toronto, professional growth is paramount to our recommended connections between candidates, companies, and positions.
Bookkeepers and accountants are both required to work with numbers, as well as financial data, all day long. Therefore, individuals in these roles must have a strong interest in mathematics, be able to perform basic calculations easily, and enjoy varying degrees of number crunching.
Bookkeeping skills involve:
- Attention to detail
- Ability to move between different projects
- Familiarity with accounting programs and computer software
- Comfortable learning new computer systems when necessary
Accounting skills involve:
- Ability to interpret different financial figures and data
- Sharp logic skills
- Big-picture problem-solving abilities
- Proficiency in determining big-picture conclusions and replaying them effectively
Certain skill sets can appeal more to agile, entrepreneurial companies, or they make all the difference for a candidate who’s looking to transition into a new industry. At our accounting recruitment firm, we apply our unique candidates’ qualifications, soft skills, personality, and fit to more than just common interview questions. We also apply them to the introduction and follow-up, unique interview tasks, and assignments we’ve come across in our years of experience.
Which role does your business need?
It’s important for your business to understand whether you need the assistance of a bookkeeper, accountant, or both. Here are a few additional tips to help you determine which role best suits your current needs:
Consider a bookkeeper if:
- You need record-keeping completed for daily transactions
- You have smaller inventories and a less complex business structure
- You have a conservative spending budget
Choose an accountant:
- To help monitor and record complex transactions
- If you have larger inventories
- If you’re looking to invest more in your company’s financial future
Being an accounting job agency in Toronto means we understand what it takes to develop an effective recruitment process that benefits both potential employees and employers. We take the time to study not just our candidates, but also the roles we recommend for them, the opportunity for development and success, as well as the career path of the candidate even beyond that role.