The term bookkeeping tends to mean different things to different people. Some individuals believe bookkeeping and accounting are the same thing (although accountants tend to argue against this). Others believe the two are related, but are different roles. And then to compliment matters further, there are also people who think because a company has an accountant, there’s no need for a bookkeeper at all. So, what actually is bookkeeping? Let’s find out…
It’s easy to see why the two professions are confused. Each roles’ dictionary definition is bafflingly similar. The Cambridge Dictionary’s definitions are, for example:
- Bookkeeping: “the job or activity of keeping an exact record of the money that has been spent or received by a business or other organisation”
- Accounting: “the skill or activity of keeping records of the money a person or organisation earns and spends”
Luckily, the Association of Accounting Technicians (AAT) have a much clearer description of both roles:
- Bookkeeping: “Bookkeeping is a key function at the heart of every business, and the first step in the accounting process”
- Accounting: “Put simply, an accountant reports, records and analyses the financial transactions of a business”
As the word suggests, bookkeeping is about ‘keeping books’. A bookkeeper keeps an accurate and complete record of the financial transactions of a business – they report but do not tend to analyse the results. The transactions are usually logged in the company’s general ledger (a record of all the accounts that a company uses). In modern accounting systems, this often involves using a cost effective software such as QuickBooks. The next step is where an accountant comes in. They will then interpret, analyse, review, and report on the financial information provided by the bookkeeper.
A bookkeeper may also post debits and credits, produce invoices and complete payroll for a company.
What’s important to note is that while all businesses require accounting (to know how they’re doing financially), not every businesses will have a bookkeeper. In small companies especially, the owner may opt to balance the books themselves – they play the role of both the accountant and the bookkeeper.
Bookkeeping or Accounting?
If you are deliberating between becoming a bookkeeper or accountant, it’s essential you know the difference between the two. Head to our bookkeeping Vs accounting article to find out the main differences between the professions.
If you’re considering a career in accounting, contact Aspiring Accountants today for free informative advice and to discuss your options.