Working in a company’s financial section is always confusing. Some people can call you a bookkeeper, while some will say you are an accountant. The big question is, “What is the difference between a bookkeeper and an accountant?” There has been plenty of confusion in the business world about the difference between the two.
It comes down to the size of the organization hiring them and, of course, the role that each serves for their respective clients or employers. In this post, we will explain both bookkeeping and accounting one by one. Many businesses in Prince George also use small business bookkeeping services to manage financial record management and stay ready for income tax reporting.
Local companies also depend on online bookkeeping services and bookkeeping support to manage accounts payable and receivable accurately. A professional tax accountant may also review records before annual tax filing.
Bookkeeping and Financial Record Management
It is the process of recording the financial transactions of a company systematically in order to show how these transactions relate to each other. Bookkeeping services are a part of accounting services and involve performing one or even all eight steps involved in the bookkeeping cycle.
- Transactions
- Journal Entries
- Posting
- Trial Balance
- Worksheet
- Adjusting Journal Entries
- Financial Statements
- Closing The Books
Bookkeeping records everything. It records financial events such as the purchase of supplies. It records the sale of a product. It records the return of a product. It also posts entries in appropriate journals like accounts payable and receivable. It prepares financial statements such as balance sheets, profit and loss accounts, and income statements. It closes the books at the end of each accounting period.
Bookkeeping mainly focuses on data entry. It also focuses on the ongoing maintenance of your business records. It is responsible for the reliability of the business data used by professional tax accountant experts. Many firms today use monthly bookkeeping services and payroll bookkeeping services. These services help maintain correct payroll and tax data.
In the past, records were kept in books, hence the name “bookkeeping.” But today, bookkeeping is performed digitally, but the names of the books, like “journal,” “cash book,” or “day book,” are still used in companies. The primary function of a bookkeeper is recording transactions in the journal plus posting to the ledger.
Types of Bookkeeping Used by Businesses
There are mainly two types of bookkeeping.
- Single Entry
- Double Entry
In the first type of bookkeeping, the records of each transaction in a company are carried to the debit or credit column of a single account. On the other hand, two entries of each transaction are carried to the ledger in double-entry bookkeeping—one to the debit side and one to the credit side of the corresponding business account.
Many businesses in Prince George use QuickBooks bookkeeping support to manage these entries automatically and improve financial record management accuracy. Using online bookkeeping services also helps small companies follow Canadian income tax and CRA reporting requirements.
Accounting and Tax Reporting
It is the systematic way of recording and reporting as well as analyzing a company’s business transactions. As we know that bookkeeping involves making a company’s financial transactions, the role of bookkeeping is encompassed within the accounting process, and the bookkeeping system used by businesses would form part of the accounting system.
Accounting is broader than bookkeeping. The primary job of a professional tax accountant is to prepare reports based on the data gathered by the bookkeeping process. They are also responsible for preparing different tax return documentation for people and businesses.
For example, income tax return, payroll tax return, etc. Apart from this, accountants can help businesses with registrations, financial compliance, and other services. Accounting is less mechanical and involves setting up a bookkeeping system, regularly monitoring it, and interpreting the results.
Business accountants specialize in many areas of accounting, like auditing, management, and taxation. The way a business enterprise handles its finances depends on how big or small it is, and both ways have their advantages.
Bookkeeper vs Tax Accountant for Small Businesses
If you are running a bigger company, then you will have a whole department devoted to accounting. If you have a small firm, then all the bookkeeping and accounting-related work will be done by a single or couple of professionals. In this situation, that person will often be referred to as an accountant.
Remember, bookkeepers have lesser responsibility in comparison to tax accountants. Their tasks are more on recording basic transactions. Some bookkeepers are competent in areas like computation of income tax payable for small business enterprises, depending on their experience and expertise.
Many companies today hire small business bookkeeping services or online bookkeeping services to manage accounts payable and receivable, payroll, and financial reports correctly. Services like monthly bookkeeping services and payroll bookkeeping services also help businesses stay compliant with Canadian tax rules.
An accountant is a management member of a business, whereas a bookkeeper is a staff member of an accounting team in a company. This is the reason that accountants are paid more in terms of salary.
A company may contract an accounting services firm to set up their financial system. Then hire a bookkeeper to maintain records that are later used by accountants to create reports. It supports business operations and income tax filing.