Both bookkeeping and accounting are vital processes of any business. To the untrained eye, however, they are often mistaken as the same profession. Even though they do have many crossovers, their objectives do differ.
I like to think of it as two stages. Bookkeeping generally refers to and involves recording, identifying and measuring financial transactions. There are some truly outstanding bookkeepers who remain pivotal to the success of an organisation and who provide stakeholders with valuable information on which to base their decisions.
Accounting is then the process of summarising, analysing, and communicating the financial data recorded to the appropriate legal body, such as HMRC. Accounting records also help businesses make major financial decisions, and better plan their business and cash flow going forward.
Summarising the Key Differences Between Bookkeeping and Accounting:
- Bookkeeping is recording financial transactions, whereas accounting is communicating the economic data.
- Management and legal decisions are not made from the bookkeeping records, and only from the summarised accounting data.
- Bookkeeping allows you to keep all monetary records organised and systematic. Accounting, however, grants you a better understanding of the business’s financial situation. You can then communicate that to the appropriate authorities.
- Bookkeeping does not involve financial statements, as opposed to accounting, which prepares them.
- Accounting analyses the recordings gathered through the bookkeeping process and compiles that data into official reports.
Nowadays, the landscapes of bookkeeping and accounting are merging and shifting. The reason for this is the development of software. New cloud-based and digital software can automatically record financial information and can summarise that information into basic reports. These reports can then be overseen and processed more thoroughly by a qualified accountant.
ACCOUNTANTS IN BIRMINGHAM
If you need any support with your business accounts, please don’t hesitate to get in touch. At Engage accountancy, we understand how time-consuming running a business is. With this in mind, our expert team of accountants are happy to take the overhead stress off of your shoulders, so get in touch today!
