Bookkeeping Vs. Accounting: What’s The Difference?
Bookkeeping and accounting are terms that are often used interchangeably, but they aren't exactly the same thing.
Both play an important role in managing your business finances, but they serve different purposes.
Understanding the difference can help you determine what type of financial support your business needs.
What Is Bookkeeping?
Bookkeeping is focused on recording, organizing, and maintaining your business's financial transactions.
A bookkeeper may help with tasks such as:
Recording income and expenses
Categorizing transactions
Reconciling bank and credit card accounts
Maintaining financial records
Tracking financial activity
Preparing routine financial reports
Keeping bookkeeping records organized and current
In simple terms, bookkeeping helps answer:
“What happened financially in my business?”
Good bookkeeping creates an organized financial foundation for your business.
What Is Accounting?
Accounting generally involves taking financial information and using it to analyze and understand the financial position of a business.
Depending on the accountant and the services provided, accounting may include:
Financial analysis
Financial planning
Tax-related services
Tax preparation
Financial forecasting
Budgeting
Advisory services
More complex financial reporting
Accounting can help answer questions such as:
“What does this financial information mean, and what should I do with it?”
Think of It This Way
Think of bookkeeping as building the financial record.
Accounting uses that information to help interpret and analyze the bigger financial picture.
The quality of the accounting depends, in part, on having accurate and organized financial records to work from.
That's why consistent bookkeeping matters.
Does Your Business Need Both?
It depends on your business and your needs.
Some business owners may handle their own bookkeeping and work with an accountant for tax preparation or other accounting services.
Others may outsource their bookkeeping while working separately with an accountant.
Some businesses may eventually need both bookkeeping and more comprehensive accounting or advisory support as they grow.
The important thing is knowing what each professional does and making sure you have the support your business actually needs.
What About Your Taxes?
Bookkeeping and tax preparation are also different services.
Your bookkeeper's job is generally to maintain accurate financial records throughout the year. A tax professional may use those records when preparing your tax return.
Having organized books can make it easier to provide your tax professional with the financial information they need.
The Bottom Line
You don't have to be a financial expert to understand the role bookkeeping plays in your business.
Your bookkeeping provides the foundation for understanding your financial activity.
When your records are accurate, organized, and current, you have better information available to help you manage your business.
At Blue Crest Bookkeeping, our focus is helping small businesses maintain dependable, organized financial records so they can better understand their numbers and stay focused on running their businesses.
Accurate. Reliable. Focused On Your Success.
