Understanding the Differences Between Accounting and Bookkeeping
Books and articles associate the terms accounting and bookkeeping together most of the time. Why? It’s because they refer to the same field of work. These are two key elements in business operations. The two are very similar. Accountants and bookkeepers often work beside the other. Together, they help in the tracking and keeping of the business’ financial health.
However, some things set the two apart. This article talks about the key difference between accounting and bookkeeping.
Key Takeaways: Accounting vs. Bookkeeping
To put it simply, bookkeepers record the day to day sales, purchases, and expenses of the business. They file these records in chronological order. At the end of the month, quarter, or year, they gather these records and summarize them into financial reports.
The role of the accountant starts by the end of the bookkeeper’s responsibilities. Accountants receive financial reports and examine them. They assess how well the company did for the period and look if it is making a profit. Further, they gauge how the company will manage in the next period.
To further understand their differences, here are more key points about accounting and bookkeeping.
The main objective of bookkeeping is keeping the correctness of the records. Standards provide rules on how to correctly record transactions. Bookkeepers follow these rules and ensure that the records represent what happened during the period. If they wrongly classify a business event, the resulting reports will give the wrong picture of the company. To sum, the incorrect records will lead to wrong decisions. Therefore, bookkeepers strive to make sure that all economic transactions are accounted for and documented correctly.
On the other hand, the goal of accounting is to tell how well the company is doing financially. Accountants are not concerned with decision-making. Instead, they aim to provide the decision-makers with a concrete analysis of what‘s happening with the business.
Skills and Job Qualifications
Bookkeeping generally does not require special skills. However, bookkeepers should be able to work with a sharp eye for details and organization. They should also be good at basic calculations. Bookkeepers should hold enough understanding of business transactions and how to record them. Further, it is also advantageous if they are at least certified in a bookkeeping vocational program.
In contrast, an accounting position typically requires an accountancy degree. Companies would also sometimes require an applicant to be a Certified Public Accountant. Further, accountants must be knowledgeable in using modern accounting systems.
As opposed to bookkeepers, accountants possess a deeper understanding of financial reports and conditions. Accountants must be critical thinkers. They should be able to find reasons why the company is in a certain financial condition. They should be able to come up with strategies on how to improve the issues the business is having.
The Future of Bookkeeping and Accounting in the Technological Age
The rise of modern technology has caused many skilled workers to worry about. Artificial Intelligence (AI) and robotics are at risk of turning many skills to nothing. It is feared that computers and robots will eventually replace humans by completing many tasks.
Technology has lessened the need for humans to do manual labor. Bookkeepers may be in danger of being replaced by automated systems. Further, computers are more accurate and do not tire.
Accountants, on the other hand, possess human logic that is hard to replace. Although competing with Artificial Intelligence, humans who can learn through experience is a strength that computers cannot copy. The human thinking of accountants is irreplaceable when it comes to making effective solutions.
The future of bookkeeping and accounting is still unclear at this point. Accountants and bookkeepers will have to keep up with the times and adapt to acquire indispensable skills.
Can Accountants Do Bookkeeping?
Yes! Accountants generally have the knowledge and skills to do bookkeeping. In practice, it is usual to only have accountants, but not bookkeepers. This is because hiring both an accountant and bookkeeper may be costly.
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