O LEVEL POA-Distinguishing Between Accounting and Bookkeeping: What’s the Difference?

Distinguishing Between Accounting and Bookkeeping: What’s the Difference? 

Every business owner gets to the point when they feel the pressing need to gain control of their
business finances.  The fiscal tasks are viewed as an important issue but not as essential as the
revenue generating activity.  Although true to an extent, the economic processes can make the
difference in the success of an organization.
What constitutes control and how do you get it?  Do you hire an Accountant or a Bookkeeper?

Is there a difference? 

As with any business, there is process that dictates the input and the output of the organization -
the business cycle.  The means of measuring these activities is captured in the accounting
processes - the accounting cycle.  Accounting is a system of events that identifies, records, and
reports the economic events of an organization.  Included in the process are the bookkeeping
functions, which involves the recording of the events.
In order to determine whether a bookkeeper is sufficient or an accountant is needed will depend
upon the financial reporting needs of the organization.  Does the organization require external
reporting, in addition to internal reporting?  With they require help in the area of profitability and
tax planning?  The complexity of the data and the reporting requirements will dictate the
financial skill set needed.

The Bookkeeper

The bookkeeper’s job is to record the economic events of the organization.  The financial
transactions of the organization are recorded in a systematic way.  The skills involved in this
particular part of the accounting process are basic and require minimal understanding of
accounting concepts.  Furthermore, with today’s user-friendly accounting packages, bookkeeping
can be done with very little to no skill at all.  The understanding of debits and credits is no longer
a requirement.  Today’s accounting software uses terms such as “increase” and “decrease.”  As
helpful as this may appear, it limits the user’s ability to effectively understand the entries and
communicate the events effectively.  

The Accountant

The accountant’s job is to understand the entire accounting process and how it relates to the
business functions of the organization.  The accountant engineers the recording process and
organizes the economic events in a systematic way that provides the most benefit to the
organization.  In a very basic sense, the accountant considers the events and their relationship to
company profits and tax liability.  The challenge is to provide an operating plan that promotes
the maximization of profits but at the same time the reduction of tax liability.   The necessary
skill set for an accountant is more than basic and will vary depending upon the accounting needs
of the organization (i.e. financial accounting versus managerial accounting).
Financial control will vary from organization to organization.  Whatever the need, it is certain
that the success of an organization can be traced back to the fiscal processes of the organization.
Although often overlooked, the accounting process is the business infrastructure and without a
solid foundation in which to build, the business activities can be unstable.

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