Bookkeeping And Accounting Papers
06-May-2021 By - team

So, you’re looking for someone who can manage your business’ finances.

You want someone who has professional experience recording and understanding the business’s cash flow, who can advise the state of your finances and help make decisions that will make (or break) your business.

If this “someone” has taxation experience – even better!

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So… are you looking for a bookkeeper or an accountant?

To the untrained eye, bookkeepers and accountants might seem like the same thing. Both deal with finances, both roles require at least a basic understanding of accounting, and both generate reports regarding financial transactions.

However, sometimes bookkeeping and accounting can be quite different. In this blog, we’re going to clear the air about bookkeeping and accounting, so you can make an educated decision about what level of financial management you need for your business.

#1. Bookkeepers record financial data – accountants analyse it

The big difference between a bookkeeper and an accountant is how each profession handles financial data.

Bookkeepers, for example, record, maintain and measure financial transactions within a business. Their role is to make sure your business runs smoothly; there needs to be a comprehensive record of money coming in and money going out to understand better how successful your business is.

Enter the humble accountant, stage left.

Where bookkeepers record business transactions, accountants summarise, interpret and analyse financial data, so business owners can make important decisions about their businesses, for example, whether you need to scale up or downsize your staff or whether you need to cut back on unnecessary purchases.

Essentially, bookkeepers maintain records and the payroll, whereas accountants help understand your financial situation and help you make intelligent decisions about your business.

#2. Bookkeepers have an administrative role – accountants help with audits and advice

It’s time to dig down into the details.

Bookkeepers and accountants have very different roles. For example, bookkeepers have an administrative role – in a regular business, you might find a bookkeeper running and maintaining the payroll system, processing invoices, and reviewing your accounting systems.

Here’s an idea of what a bookkeeper’s role involves:

  • Processing invoices, receipts, payments, and other financial transactions
  • Processing and maintaining your payroll system
  • Reconciling bank accounts
  • Preparing reconciliation reports
  • Managing your accounts receivable and accounts payable

Here’s an idea of what services an accountant can offer:

  • Tax advise and planning
  • Assistance establishing a business
  • Auditing
  • Corporate reporting and compliance
  • Cash flow forecasting
  • Structuring for asset protection
  • Budgeting
  • Preparing financial statements and income tax returns

#3. Different levels of training are required to become an accountant vs a bookkeeper

There’s no arguing there are crossovers between accounting and bookkeeping.

To become a bookkeeper, you’re recommended to learn accounting basics and even take a few accounting courses before becoming qualified for the job. Plus, bookkeepers are expected to have a decent understanding of mathematics and have some administrative role experience.

To become an accountant, you must have at least a bachelor’s degree or, for a higher level of authority and expertise, you can become a public accountant.

Accountants must also meet the strict requirements of the accounting code of practice. Three professional accounting bodies manage accountants in Australia – the Institute of Public Accountants (IPA), CPA Australia (CPA) and Chartered Accountants Australia & New Zealand (CAANZ).

The minimum qualification for the CPA and ICAA is a bachelor’s degree in accounting. This is a starting point for further study. This ensures Australian business owners get the best possible financial advice and management potential.

Bookkeeping vs Accounting

Bookkeeping and accounting are both crucial business functions, but they are not the same. There are critical differences between bookkeepers and accountants. This guide will explore the main differences and provide you with all the information you need about bookkeeping vs accounting.

What is bookkeeping?

Bookkeeping is predominantly concerned with recording financial transactions and ensuring information is up to date. Suppose you have a bookkeeper working at your business, for example. In that case, they will note down transactions on a daily or weekly basis to ensure you have a chronological record of incoming and outgoing payments. Bookkeepers are responsible for looking after the books and preparing information for accountants. The principal objective of bookkeeping is to keep a record of transactions in a logical, organised manner.

What is accounting?

Accounting involves using the information provided by bookkeepers to analyse, evaluate, summarise, and interpret an individual’s financial situation or a business. Accountants take this data and use their expertise and skills to create reports and communications that provide accurate information about their financial status. Accountants can give tailored advice based on a client’s finances, and they can also offer services such as preparing and filing tax returns. In this case, an accountant will use financial records and accounts to work out how much the client owes in tax, design and fill in the return, and arrange for payment to be made on time.

The similarities between bookkeeping and accounting

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To an untrained eye, it may seem like bookkeeping and accounting are very similar. While both deal with financial transactions and numbers, there are differences. In some cases, the line between bookkeeping and accounting may become blurred. Many businesses employ a bookkeeper who tends to do more than simply record payments and update the books. Likewise, accountants are sometimes involved in looking after the accounts and analysing the information and data provided by a client.

Bookkeepers and accountants both have skills that enable them to work with figures. Still, accountants have more advanced training and additional qualifications that will allow them to offer a more diverse range of services.

The main differences between bookkeeping and accounting

Accounting is a much broader field than bookkeeping. Accountants have experience in bookkeeping, but they have a range of other additional skills, enabling them to analyse, evaluate and interpret financial data. They can create reports, offer advice and recommendations, prepare tax returns and provide a consulting service, whereas bookkeeping is concerned primarily with recording data. Bookkeepers essentially prepare the information and lay the foundations for accountants to take the next step.

When you hire an accountant, you expect more than well-presented, well-organised books. An accountant has the skills to use the data provided by bookkeepers to benefit your business and provide you with a spectrum of services, which may include completing tax returns and offering advice about lowering expenses and maximising profits.

The benefits of employing bookkeepers and accountants

In business, there’s nothing more crucial than making money. To stay afloat and achieve goals and objectives, you have to turn over profits. If you don’t have a firm grip on your finances, there’s every chance that you could encounter unexpected obstacles or run into cash flow issues. Hiring a bookkeeper will ensure that your books are in order from day one.

Once you have financial information, it’s wise to use this data to drive your business forward. Whether you’re self-employed and work alone or have a business that employs hundreds of people, an accountant can provide you with various services.  For many individuals and business owners, getting ready for tax deadlines can be stressful. It’s hugely beneficial to have your books in order as the deadline looms so that your accountant can analyse the data and work out how much tax you have to pay.

Hiring an accountant to take care of your taxes for you eliminates stress and enables you to devote your time to the core elements of running your business. There’s also a lower risk of making mistakes or getting the calculation wrong. If you’re not experienced in accounting, you’ve never filed a tax return before, or you’re unsure about what kinds of expenses you can claim; for example, it’s hugely beneficial to employ an accountant.

If you make errors or you miss deadlines, you may be fined.

Another benefit of working with an accountant is that it allows you and your employees to focus on the tasks that match your skill sets. You can continue to tick off the jobs on your list without worrying about your finances.

Modern-day bookkeeping

As with most aspects of business, bookkeeping has been impacted by the rise of technology. While most companies used to employ a bookkeeper or utilise traditional bookkeeping techniques, many use software programmes today. Bookkeeping software like Xero bookkeeping enables business owners to take advantage of automated features, which reduce the time it takes to record transactions and lower running costs.

If you utilise software, you don’t have to employ a bookkeeper, which could significantly impact your operating expenses. With bookkeeping software, you can also access real-time data, and you can customise the settings to suit your business. You can choose how you want to manage your books, and you’re not limited to a rigid, universal system.

One of the most significant recent developments in the world of technology is the smartphone. Today, business owners want access to up to date information at any time of the day, regardless of where they are. With this in mind, modern-day bookkeepers and accountants create records and reports online at the touch of a button.

If you’re not familiar with either bookkeeping or accounting, you may assume that they are the same thing. There are similarities, but there are also several crucial differences. Bookkeeping is focused on recording information and ensuring the books are up to date, while accounting offers deeper interpretation and analysis of financial information. The work undertaken by bookkeepers lays the foundations for accountants, enabling them to prepare reports, file tax returns and offer insightful, tailored financial advice.

What is the difference between an Accountant and a Bookkeeper?

What would be your answer if you were asked to differentiate between accounting and bookkeeping? For most people, especially those outside of the industry, the question’s answer would not be obvious. With this in mind, to help you understand the functional differences between accounting and bookkeeping and choose whether you’d prefer to be an accountant or a bookkeeper, we’ve created a handy guide that should leave you in no doubt about which career to choose.

Before delving further, you should understand that bookkeeping and accounting have common goals but make up different financial cycle stages. Bookkeeping comes before accounting, but their functions may overlap. Let us start by looking at the parts of each of the two careers.

What Bookkeeping Entails

Bookkeeping can be defined as the process of recording financial transactions, including purchases, sales, payments and receipts by or for an individual or a business organisation. Just to summarise, here are the critical functions of bookkeeping in a financial cycle:

  • Recording of the financial transactions of a business
  • Posting a company’s debits and credits
  • Balancing as well as maintaining general ledgers, subsidiaries, and historical accounts
  • We are producing invoices as well as completing payroll.

At the centre of bookkeeping is maintaining the general ledger. This is an essential document in which the bookkeeper (a professional in the field) records the details of day-to-day financial transactions from the sale and expense receipts. The ledger’s size will depend on how many sales are completed before the end of the accounting cycle, daily, weekly or monthly. Although early chronicles were done on paper, you’ll already know that much of this work is now computerised, making it much easier to perform the tasks needed to update the ledger.

Don’t forget, though, although the use of technology makes things easier. A good business practise requires that certain transactions must have supporting documents. The information on business transactions that require supporting documents is available at the ATO (Australian Tax Office).

What Accounting Entails

Accounting can be defined as the action or process of recording, sorting, storing, summarising, retrieving and presenting financial transactions in a manner that can help a business or any other commercial establishment make informed decisions. The accounting process may include the following:

  • Preparing and adjusting entries (searching for and recording transactions that were not recorded in the books).
  • Carrying out the analysis of the operational costs of the establishment
  • Preparing the financial statements of the business
  • Completing tax returns, including income tax returns
  • Helping the business owner to understand the impact of economic decisions

Accounting seeks to provide reports that put together the financial indicators of a business. Therefore, the main aim of accounting is to deliver a better understanding of a firm’s profitability and the awareness of cash flow. It uses the information availed by bookkeepers in the ledgers. Accountants also help business owners with financial forecasting, strategic tax planning as well as tax filing.

Which Should You Be?

Now that you have a clear understanding of what bookkeeping and accounting entail, it’s likely to throw up the questions of which career you’d prefer. There are many considerations to take into account when choosing your job, and we’ve listed some below to help you make up your mind.

Bookkeeping:

To be a bookkeeper, you need to have the right skills and qualifications. The Certificate IV in Accounting and Bookkeeping (FNS40217) is designed to help you gain the knowledge that employers are looking for in this field. The course is nationally accredited and meets the qualification requirements needed to become a registered Business Activity Statements (BAS) Agent. A good bookkeeper’s attributes include high accuracy, knowledge about various financial topics, and attention to detail. A bookkeeper’s work is under supervision by an accountant or a small business owner whose financial books they are keeping.

Accounting:

An analytical mind and an appetite for problem-solving are attributes for success in the field of accounting. The Diploma of Accounting (FNS50217) is designed to give you the training and knowledge for a range of career pathways in the accounting, business and finance sectors. The course is nationally accredited and will provide you with some of the academic units required to become a Registered Tax Agent.

From the above information, you should be able to decide which career path to take. Accountants rank higher in the job scale than bookkeepers, but remuneration may depend on the business’s size. The undeniable fact is that both of the professionals are needed by any serious business owner.

Guest post by : team Form -

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