The Difference Between Bookkeeping and Accounting

The world of finance is as extensive as it can get. There are millions of concepts, rules, definitions, and principles. In the middle of all this, it’s common for individuals to mistake bookkeeping for accounting. While both of these are essential business functions, here are the differences:

Basic differences

Bookkeeping is primarily related to recording transactions. Any activity related to identifying and measuring financial transactions is counted as bookkeeping. On the other hand, accounting helps you summarize, interpret, and communicate the same financial information in a ledger account.

The prime objective of bookkeeping is to ensure that all the transactions take place in a proper and systematic way. On the other hand, the aim of accounting is to gauge the organization’s financial health through that data and further communicate the data to relevant stakeholders.

Decision making

Financial information is very important from a decision-making perspective. Your company’s top-tier management needs access to timely, accurate, and relevant financial information at all times to see where the enterprise is heading. It helps them understand where they need to invest more and what business unit requires them to cut costs.

A well-prepared financial statement also tells you about the business unit that’s churning out the most amount of revenue for you. Consequently, the company can increase its bottom line by channeling its efforts toward the business unit that offers a greater revenue.

Skillset

Bookkeeping isn’t really a complicated task and similarly doesn’t require any specialized skillset. On the other hand, accounting is a very extensive field of work that requires a complicated skill set and qualifications. There is because there is a lot of analysis involved in the accounting process.

A good accountant ought to be able to be aware of industry trends, historical data, and other macroeconomic indicators to draw a useful comparison between the company and the rest of the industry. It’s also the accountant’s job to compile the financial data into its useful form, generate project feasibility reports, prepares the company’s budget, and plans out loan proposals.

This is why the bookkeeper’s work is usually overseen by the accountant.

Duggal Professional Corporation is an Edmonton-based accounting firm that offers expert payroll accounting services to all kinds of businesses. Our services also include yearly tax compliance and filling and financial reporting.

Get in touch with us to learn more about our accounting services.