Bookkeeping VS. Accounting
Accounting and bookkeeping are frequently used interchangeably. Though bookkeeping and accounting are closely linked, there is a fine line between the two. Bookkeepers keep track of a company’s financial transactions on a daily basis. Accountants, on the other hand, are more involved with the big picture, they are in charge of interpreting, categorizing, evaluating, summarizing, and reporting financial data.
There are a lot of finer points involved with bookkeeping and accounting systems. A keen attention to detail is essential especially for the untrained eye. Accountants perform audits and estimates for future business needs. These expert professionals use the bookkeeper’s inputs to create financial statements. To add, they review and evaluate the financial information recorded by bookkeepers on a daily basis.
Since the two professions are related, bookkeepers and accountants frequently work together. Both of these roles require a lot of the same skills and abilities. However, there are some important differences, such as the work involved in each career and what is essential for success.
So if you are considering outsourcing an accounting or bookkeeping service in Los Angeles then here’s what you need to know about these two roles. Figure out which one your company needs.
What Is Accounting?
Accounting is also known as the language of business.
It is the systematic process of gathering, analyzing, and disseminating data about the financial transpiring within a business. Accounting helps determine a company’s financial position and present it to stakeholders. It also helps business owners in making short- and long-term development plans and decisions.
Accounting speaks for a company’s credibility to the target market with the purpose to provide a clear overview of financial statements to its stakeholders which include investors, lenders, employees, and the government.
The following are some common accounting tasks:
- Provide data validation and analysis
- Create reports, carry out audits, and put together financial records like tax returns, income statements, and balance sheets
- Provide data for predictions, business trends, and expansion opportunities
- Assist business owners to understand the effects of financial decisions
The accounting process generates reports that bring key aspects of your company’s finances together to provide you with a detailed picture of where your finances are, what they mean, what you can and must do about them, and where you can expect your company to be in the near future.
All CPAs are accountants. However, not all accountants are Certified Public Accountants (CPAs). An accountant and a Certified Public Accountant (CPA) are not the same things. Although both can prepare your tax returns, a CPA has a better understanding of tax laws and can represent you once audited by the IRS.
And What Is Bookkeeping?
Bookkeepers are in charge of maintaining the books and gathering data for accountants. Keeping information up to date and recording financial transactions are their main concerns. For instance, if you have a bookkeeper on the team, they will record transactions daily or once a week to make sure you have a chronological record of incoming and outgoing transactions.
The main objective of bookkeeping is to keep an accurate record of all financial transactions in a business. This data is used by companies to make major investment decisions.
Bookkeeping tasks includes the following:
- Keep track of financial transactions
- Post credits and debits on record
- Create invoices
- Make financial statements (balance sheet, cash flow statement, and income statement)
- Keep and balance subsidiary accounts, general ledgers, and historical accounts
- Complete payroll.
The size of the company and the volume of transactions processed daily, weekly, and monthly are common factors in determining how complicated a bookkeeping system is. Your company must consistently record all sales and purchases in the ledger, and some transactions require supporting documentation.
Bookkeeping is essential whether your business is big or small, a multinational corporation or an independent contractor. Bookkeeping helps create a budget. And with a budget, any business owner can more easily plan for future expenditures and investments. Additionally, bookkeeping also makes tax preparation easier.
The Bottom Line
Both bookkeeping and accounting are important for business success. While there are some similarities, there are also a number of significant differences.
While accounting provides a more in-depth interpretation and analysis of financial data, bookkeeping is focused on recording information and keeping the books up to date. The work done by bookkeepers paves the way for accountants, giving them the tools they need to create reports, submit tax returns, and provide incisive, personalized financial advice. In simple terms, bookkeepers prepare the data and lay the groundwork for accountants to proceed.
Accounting and bookkeeping are vital components of every business. For this reason, The Bookkeepers R Us team is composed of professional and qualified accountants providing the best and most affordable CPA and bookkeeping service in Los Angeles!
Expect our bookkeepers and accountants to evolve with the current market situation. We have the technical expertise to work with new systems and technologies.
Worried on how to manage your finances on your own? Get assistance from the best CPA firm in Los Angeles now!