The biggest difference between accounting and bookkeeping is that accounting involves interpreting and analyzing data and bookkeeping does not. Listed below are a few more major differences:
|Bookkeeping Is…||Accounting Is…|
When most business owners think about bookkeeping and accounting, they oftentimes think it’s the same thing. There are, however, differences between these two functions, both of which are essential and required for all businesses.
While bookkeeping and accounting for your business share common goals, they each make up a different stage of the financial cycle. Let’s take a closer look at each to gain a better understanding.
Bookkeeping, also commonly known as recordkeeping is one of the main parts of accounting. Bookkeeping is the activity of recording financial transactions of the company in a systematic manner. (i.e., chronological order.)
- Responsible for the recording of financial transactions in chronological order.
- A subset of accounting.
Accounting is regarded as the language of business and is an orderly recording and reporting of financial affairs of a business for a particular period. Accounting clearly shows the financial position of a business and decisions can be taken on the basis of accounting records.
Accounting is responsible for interpreting, classifying, analyzing, reporting and summarizing financial data. In essence accounting is used to identify events that need to be recorded, recording the transactions of these events, and communicating the effects of these transactions with people inside and outside the company.
The Bottom Line
A successful marriage between the bookkeeping and accounting functions will contribute to the long-term financial success of your business. Having organized financial records and properly balanced finances produced by sound bookkeeping and accounting practices are both key factors to this success.
Some business owners learn to manage their finances on their own, while others choose to outsource to professionals so they can focus on the parts of their business they really love.
Whichever option you choose, investing – whether it be your time or money – into your business financials will only help your business to grow.
About the Author
Linda A. Hunt is a money expert who understands the spiritual power and soul behind money and its effects on the business and the person running that business. She is a true “money healer” and the creator of solutions that create stability helping business owners to grow their business and earn more money. For more FREE articles and to obtain your copy of “Your Essential Bookkeeping Checklist”, visit her at https://www.sumsolutions.com
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