Do the terms bookkeeping and accounting sound the same to you? Do you use them interchangeably? It can be tricky to understand the difference. This blog will help you know the two roles so you can choose the right one for your business.

Many businesses talk about this because there’s a lot of confusion. Both bookkeepers and accountants work with your financial records, but there are differences every business owner should know.

Some questions you might have about hiring a bookkeeper or an accountant:

  • How do I know if my business needs an accountant or a bookkeeper?
  • Do I need one permanently or just on contract?
  • Should I hire an online bookkeeper or one in-house?
  • Do I need a bookkeeper if my business is small?

This blog will help you understand these roles to find the best fit for your business.

What Does a Bookkeeper Do?

A bookkeeper records daily financial transactions, updates the general ledger, and prepares trial balances for accountants. They also keep documents for taxes, watch cash flow, and help prepare financial reports for management.

Common bookkeeper tasks include:

  • Keeping a balanced general ledger
  • Preparing trial balances for accountants
  • Checking differences from the budget
  • Setting up different accounts
  • Recording financial transactions
  • Helping prepare financial reports by gathering and summarizing information
  • Creating a chart of accounts

Bookkeepers may also need to learn specific accounting software based on your business needs.

What Does an Accountant Do?

An accountant works with the numbers from the bookkeeper but does much more. They need strong logic skills and big-picture thinking. Accountants use the detailed information from the bookkeeper to make broader conclusions.

Common accountant tasks include:

  • Preparing income tax returns
  • Reviewing company financial statements
  • Analyzing accounts
  • Conducting audits to ensure ethical standards
  • Making forecasts and “what-if” analysis
  • Monitoring taxes and preparing returns
  • Assessing financial risks in contracts
  • Helping make business decisions like setting up provisions and reserves

Differences and Similarities Between an Accountant and a Bookkeeper

Both bookkeepers and accountants work with financial data, but their roles are different. Bookkeepers record daily transactions, keep financial records, and produce reports. Tax Accountant provides higher-level analysis and advice.

Bookkeepers manage financial transactions such as sales, purchases, and payments, ensuring precision in record-keeping including maintaining the general ledger, accounts payable, and accounts receivable. They also undertake bank account reconciliation, oversee payroll administration, and prepare financial statements such as income statements, balance sheets, and cash flow statements.

Accountants take this information and use it to provide a broader financial analysis and make strategic recommendations for the business.